Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

WRIT ISSUED DURING THE ADJOURNMENT

MR. SPEAKER acquainted the House that he had issued, during the Adjournment, a warrant for a new writ for the borough constituency of Eastbourne in the room of Ian Reginald Edward Gow, Esq, deceased.

Oral Answers to Questions — SOCIAL SECURITY

Social Fund

Mr. Wareing: To ask the Secretary of State for Social Security how many and what percentage of income support claimants aged under 60 years are repaying social fund loans by deductions from their benefit payments.

Mr. Watson: To ask the Secretary of State for Social Security how many and what percentage of income support claimants aged under 60 years are repaying social fund loans by deductions from their benefit payments.

The Minister for Social Security and Disabled People (Mr. Nicholas Scott): At the end of August this year 384,207 social fund loans were being recovered from income support recipients aged under 60, representing 13·3 per cent. of income support recipients in that age group.

Mr. Wareing: Now that the Government have succeeded in their objective of further impoverishing the poor, is not it time that they began to listen to their Social Security Advisory Committee which, in its seventh report, said that in no way was the social fund curing or assisting in alleviating poverty for the very poorest people? Will the Minister give an assurance that he will immediately implement the recommendation that loans for capital items should not have to be repaid, and that he will take steps to ensure that loans that are provided are repaid at a level at which poor people are not driven to go to commercial moneylenders?

Mr. Scott: I would accept neither that there has been an increase in poverty in this country in the past 10 years, nor that the social fund is not doing an important and sensitive job in meeting need where it needs to be met. Some 2·4 million loans are now being given at a cost of about £334 million and half a million grants at a cost of £131 million. They have been targeted on those who need help most.

Dame Elaine Kellett-Bowman: Will my right hon. Friend assure me that persons who applied for capital allocations under the single payment scheme year after year are not doing exactly the same for the same items

under the present system? Does he recall an occasion when one of my constituents applied for over £600-worth of capital items, which she got, and the following year applied for identical items, which she did not get? What happens now? Can people now get loans for the same items, and is a careful record kept?

Mr. Scott: We keep careful records on each claimant's patterns of applications for loans. After a year, there might be a renewed need for a particular item, but we seek to counter abuse as actively as possible.

Mr. Sillars: Is the Minister of State aware that people come to my surgery who have been denied a social fund loan, not on the basis that they have no need, but because the Department's calculation is that they could not repay it. The need does not disappear. Those people then have to go to private moneylenders, where the minimum rate at the moment is 75 per cent. How can the right hon. Gentleman justify that?

Mr. Scott: I am interested that the hon. Gentleman has a number of constituents in that position, as about 1·6 per cent. of cases are turned down on the basis that the claimant is unable to repay the loan. In those circumstances, it would be wrong for us to give a loan to the applicant. Alternative sources of funds are suggested to those claimants and they are offered advice on how to manage their affairs.

Mr. Teddy Taylor: Has the Minister had time to study the case that I sent to the Secretary of State, about a young lady in Southend-on-Sea who applied for a social fund loan because she was allocated a council house in place of bed-and-breakfast accommodation, and was told that that could not be regarded as a priority within the limited budget? When I pointed out that the young lady had just come out of prison, she was given the grant because apparently that is a priority under the guidance given by the Department. While the Secretary of State is considering that case, will the Minister try to ease bureaucracy in the DSS by putting up a notice in every department saying, "If you have been to prison please advise the staff, because that could be to your financial advantage"?

Mr. Scott: My hon. Friend will not expect me to comment on the particular case that is being considered by my right hon. Friend the Secretary of State. The guidance that is issued by my right hon. Friend is supplemented by guidance on local needs that may exist in a particular area, but the final decision is made by independent social fund officers who can use their discretion and take account of that guidance as they see fit.

Mr. Meacher: How can a person on income support be expected to get by with deductions on social fund repayments when Matthew Parris, a former Tory Member of Parliament, could not get by for one week on income support, even without social fund repayments? Is not it impossibly difficult for the nearly 500,000 poorest families on social fund deductions, not only to repay their social fund loan, but to pay any housing, electricity, gas and water charge arrears and now also poll tax deductions? Have the Government reached the ultimate absurdity of denying loans to the poorest families who need them most because those families are too poor to repay?

Mr. Scott: If I may say so without referring back to the alleged experience of our previous colleague, 2·4 million loans have been made at a cost of £334 million. It seems better that that money should go interest free to people who need it than that people should be led into the hands of loan sharks, as was mentioned earlier in this exchange.

Attendance Allowance

Mr. Madden: To ask the Secretary of State for Social Security how many disabled people in Bradford have had attendance allowance suspended, pending review, over the past year; and how many have had (a) the decision to suspend upheld and (b) their review application upheld and arrears paid.

Mr. Scott: Attendance allowance is suspended pending a review only if there is reason to suspect that the claimant no longer satisfies the conditions for the benefit. Statistics are not kept on the number of those suspensions, though their numbers are likely to be very small.

Mr. Madden: Does the Minister accept that it is distressing and worrying for any benefit recipient to have benefit suspended and income cut? Will he give an assurance that his Department is not targeting disabled people in Bradford or elsewhere, because there certainly are suspicions that a cost-cutting exercise is under way and that disabled people are being made the victims of it in an unnecessary and unacceptable way?

Mr. Scott: That happens rarely, so rarely that we do not collect the statistics. Benefit would be suspended if a claimant returned his order book, if there were a change in his care needs or if a person were in hospital for longer than four weeks or in prison, and therefore was not in need of attendance allowance. Those are the circumstances in which suspension might be considered.

Mr. John Greenway: Does my right hon. Friend agree that the number of recipients of attendance allowance and other disability benefits has increased dramatically under this Government in the past 10 years? Can he tell the House what arrangements he proposes to include in the social security Bill in the next Session to ensure that those who apply for benefits have their applications dealt with smoothly and that we reduce the number of appeals?

Mr. Scott: We shall certainly improve the administration of the new disability allowance, which will subsume the present attendance allowance, and the methods of assessment, with reduced reliance on medical evidence. We shall also substantially lower the benchmark that people need to qualify for the new benefit.

Mr. Cryer: How can the Minister claim that the incidence of attendance allowances being suspended pending a review is sparse when there are no statistics to demonstrate the case one way or the other? Does he accept that there are far too many cases and that it would be fairer if the benefits were continued pending any review that the Department seeks to invoke? People feel harshly treated and must often make great sacrifices and endure hardship as a result of those reviews, most of which result in the back payments being made.

Mr. Scott: Obviously, we take account of the experiences of our local offices in deciding whether there is

a problem in any benefit area. If there appears to be a problem, we move swiftly to tackle it. There is no evidence of such a problem in this instance.

Personal Pensions

Mr. Donald Thompson: To ask the Secretary of State for Social Security what is the latest estimate of the numbers who have taken out personal pensions.

The Parliamentary Under-Secretary of State for Social Security (Mrs. Gillian Shephard): A total of 4·1 million people have so far taken out a personal pension.

Mr. Thompson: I thank my hon. Friend for that satisfactory answer. Will she comment on the Labour party's policy? Having frightened pensioners—

Mr. Speaker: Order. That is a bad habit. In this Session can we stick to the Government's policies at Question Time?

Mr. Thompson: I am sure that it will not be the Government's policy to frighten potential pensioners as it is the policy of the Labour party.

Mrs. Shephard: My hon. Friend is right. The Government's policy is to encourage choice in pensions so that people can remain in SERPS, take out a personal pension or belong to an occupational pension scheme. It would not be the Government's intention to
turn the pensions market on its head.

Mr. Frank Field: As the Government do not believe in bucking the market, will the Minister tell the House why she feels that the proposals need to be subsidised from the national insurance fund? Will she tell the House to what extent the national insurance fund has been raided in an attempt to make the scheme a success?

Mrs. Shephard: I am sure that the hon. Gentleman will agree that the Government of which he was a member also introduced incentives for changes in social security policy. He will also know that the major cost of personal pensions is not the 2 per cent. incentive but the cost of rebates, as it would be for occupational pensions. The incentive represents less than 2 per cent. of the total income of the national insurance fund.

Mr. Butler: If contracting out of the state system has proved so popular, does my hon. Friend have any plans to extend the principle?

Mrs. Shephard: I have already said that the Government are in favour of choice in pensions policy and no doubt we shall be looking for ways to extend the principle of choice.

Mr. Flynn: Will the Minister treat us to a rare moment of honesty on this matter—

Hon. Members: Oh.

Mr. Speaker: Order. That is a little harsh. Will the hon. Gentleman withdraw that phrase?

Mr. Flynn: I shall withdraw it. I did say "rare". I was not suggesting that the Minister is constantly dishonest.
Will the Minister admit that this has nothing to do with choice? The Government are trying to shuffle off their responsibility to 4·1 million people, who will find when their pensions are paid, as independent sources have


shown, that at least 1 million of them have been badly advised and bribed out of a good scheme that has been running for a long time. Will the Government give us an undertaking that all those who have been misled out of the pension scheme will be told when it is in their best interest financially to return to the national insurance scheme?

Mrs. Shephard: The matter was fully rehearsed during the passage of the Social Security Bill this year, so the hon. Gentleman will know that all those marketing personal pensions must belong to the Life Assurance and Unit Trust Regulatory Organisation or the Financial Intermediaries, Managers and Brokers Regulatory Organisation and have to observe a code of conduct about the best advice that has to be given to the customer. The hon. Gentleman and his party do not like the success of the extension of choice.

Family Credit

Mr. Arbuthnot: To ask the Secretary of State for Social Security how many families are now in receipt of family credit.

Mrs. Gillian Shephard: The number of families receiving family credit has risen in each month during 1990. The latest available information is for the end of July, by which stage the caseload had reached 323,000. That is the highest ever level since the scheme began.

Mr. Arbuthnot: Is it correct that the Government are carrying out a successful campaign to publicise family credit and does my hon. Friend agree that the Government's commitment to the family is well demonstrated by the fact that this year nearly £5,500 million is being paid in social security benefits to low-income families? Is it true that when the Labour party was in power, it cut benefits to families?

Mrs. Shephard: Family credit certainly represents an important part of the Government's policy for the family. Interestingly, on average the amounts payable in family credit come to £30 a week but over 15 per cent. of family credit recipients receive £50 or more. The advertising campaign increased not only applications but the level of awareness of that worthwhile benefit.

Mr. Pike: Is the Minister concerned about people who take part-time work and thereby become ineligible for family credit, who would be better off being out of work and claiming benefit and income support? Is not it time that the Government did something to help them?

Mrs. Shephard: I think that the hon. Gentleman is referring to the cases of certain ancillary workers, of which I am aware. The chief adjudication officer has issued further guidance for those cases and we are considering its effects carefully. It was clearly never our intention that families should find themselves unable to get income support or family credit.

Mr. Peter Bottomley: Will my hon. Friend confirm that every family who is receiving family credit is also receiving child allowance? Will she confirm that income support, whether it be family credit, supplementary benefit or other systems, has always taken the child allowance into account? Does she agree that instead of referring to child benefit, we should refer to child allowance, so that we can agree with our right hon. Friend the Prime Minister, who

said on 17 March 1981 that the tax and benefits system should always take account of people who have children and that it is a matter not of income support but of child allowance?

Mrs. Shephard: I thank my hon. Friend for that contribution, which was as interesting as one has come to expect from him. All families with children receive child benefit for each child. As for the name of the benefit, I quite like child benefit.

Social Fund

Mr. Michael: To ask the Secretary of State for Social Security how many and what percentage of income support claimants aged under 60 years are repaying social fund loans by deductions from their benefit payments.

Mr. Scott: I refer the hon. Gentleman to my earlier reply to the hon. Member for Liverpool, West Derby (Mr. Wareing).

Mr. Michael: May I refer the Minister to his reply and ask that he listens to his own words? Does he agree that it is outrageous for a Minister to admit that there are people who are getting such a low income from the Government that they cannot afford to repay a loan and that therefore the Government refuse them a loan? Is not it outrageous for him to say that they will get not help but only advice from the Government? Is not he aware that he is talking about the poorest people of our society who want help, not advice from him and his Department?

Mr. Scott: As I said—perhaps the hon. Gentleman did not hear my reply—only a tiny percentage of people are refused help on the basis that they are unable to repay a loan. Some people may be refused loans but be given a community care grant instead.

Mr. McAllion: It has been alleged that the Department is about to issue instructions to the officers who administer the social fund that they must keep within budget next year on pain of disciplinary action. Will the Minister take this opportunity to deny any such possibility being considered by the Department, and does he agree that the only condition that should be applied to social fund applications is whether the applicant needs help from the social fund?

Mr. Scott: It is the duty of local office managers so to manage their budgets that they stay within them over the year. Last year, we gave extra help to local offices that were under stress, which showed the continuing flexibility of the social fund.

Maintenance

Mr. Favell: To ask the Secretary of State for Social Security what representations he has received on his proposals to ensure that fathers pay maintenance.

The Secretary of State for Social Security (Mr. Tony Newton): I have received correspondence on this subject from one of the major lone-parent organisations, members of the public and other interested parties. We shall shortly publish full details of our proposals in a White Paper.

Mr. Favell: Any plans that my right hon. Friend has to ensure that fathers recognise their duties to children, whom they helped bring into the word, will be most


welcome. Does he have any plans to point out to single mothers—mothers who have never been married—the enormous pressures that will be put on them by having children while they are unmarried? Any Member of Parliament hears from teachers, pressure groups, social workers and so on how enormously difficult it is for single mothers.

Mr. Newton: My hon. Friend's very helpful suggestions range rather wider than my specific remit for social security, but, indeed, our policies on child maintenance range beyond social security. I am concerned that we should have a clear-cut, more workable system to ensure that where maintenance can properly be expected it is paid. That is in the interests of lone parents, whatever the cause of the lone parenthood, and, above all, in the interests of children.

Ms. Abbott: Is the Minister aware that there is widespread support for the idea that fathers should take responsibility for their families but that there is also widespread fear that the proposals represent a backdoor way of cutting maintenance for single mothers? Will the right hon. Gentleman assure the House that no single mother will be worse off as a result of the proposals and of whatever legislation may arise from them than she would otherwise have been?

Mr. Newton: I think that the hon. Lady referred to cutting maintenance. Clearly, the aim of the proposals as a whole is to increase the amount of maintenance that is paid. But perhaps the hon. Lady simply made a verbal slip.
I cannot attempt today to anticipate all the details of the White Paper that we shall publish, but our aim is to improve the position of lone parents and, not least, to provide them with a better platform on the basis of which they can work if they wish.

Mrs. Roe: Can my right hon. Friend provide the House with figures to show the proportion of absent parents who are currently providing maintenance?

Mr. Newton: Yes. I can do that in round figures. Maintenance is paid in about one third of all the cases in which it might be expected. For lone parents on income support, maintenance is paid in slightly less than a quarter of cases. Both figures are too low and one of our aims will be to increase them.

Ms. Short: Everyone is in favour of fathers maintaining their children. Is the Secretary of State interested only in saving the Treasury money or does he agree with the Labour party that lone parents and their children should be helped to escape from a life of poverty and given a chance to be independent and therefore better off?
We all know that, under the present Government, increasing numbers of lone parents have been forced to live on benefits—by cuts in child benefit and by the removal of the right to claim the costs of child care when working part time. We need encouragement to fathers to pay maintenance, but surely we also need an increase in child benefit and a chance for lone parents to have access to child care and training so that they can escape from poverty and so that they and their children may be better off.

Mr. Newton: The hon. Lady may be mildly surprised to hear me say that somewhere, buried in her question, was a general proposition—about seeking to encourage

independence and the like—with which I would certainly agree, although I accept that there may turn out to be detailed differences of opinion between the hon. Lady and me about precisely how those objectives are to be achieved. I hope that I shall carry her with me on this, however: the Government have already taken a number of steps to improve the working of the system, even within the existing arrangements—including, most notably, a substantial increase in the earnings disregard for lone parents in respect of housing benefit, which has taken place this very month.

Mr. Burns: Is my right hon. Friend aware that any proposals that come before the House will take a considerable time to be implemented because of the pressure of parliamentary business? In the meantime, my constituents and those of other hon. Members will suffer severely because their ex-husbands refuse to pay them maintenance and can use delaying tactics in the court—for example, in the provision of the relevant and necessary proof of earnings and so on—and so evade giving any funding for their former families. Is there anything that my right hon. Friend and his Department can do in the meantime to help those ladies who are in genuine financial difficulties as a result of that practice?

Mr. Newton: I do not think that we can solve these problems entirely without the proposals that we shall be bringing forward, which will obviously take a little time. But there are things that we can do and, indeed, that we are doing. The Social Security Act 1990, which was passed during the summer and of which the relevant provisions are just coming into effect, gives us power to transfer DSS maintenance orders to a claimant who is going off income support and gives the DSS power to enforce a claimant's own maintenance order if that would be helpful. Both those provisions are directed at solving precisely the problems to which my hon. Friend referred.

Carers

Mr. Cousins: To ask the Secretary of State for Social Security what steps he will take to investigate the problems of full-time carers.

Mr. Newton: A report based on research commissioned by the Department into the effectiveness of invalid care allowance as an income-maintenance benefit is expected to be published in the next few months. Our concern to improve the support available to carers, is reflected in a range of Government policies, including the extension of invalid care allowance to married women and the introduction earlier this month of a carers premium in the income-related benefits.

Mr. Cousins: Does the Minister recognise that without the help of about 1 million full-time carers, the hospitals and social services systems in this country would have collapsed long ago and that, for the most part, all that work goes unrewarded and unrecognised? Does he also recognise that the invalid care allowance is a very limited contribution and the extension to married women was wrung out of the Government by the European Court? Will the Minister now make the extension of a care allowance system to all carers an absolute priority? As a basic minimum, will he offer all full-time carers national


insurance credits so that they are not disadvantaged for pensions and unemployment benefit when their period of full-time caring ceases?

Mr. Newton: The hon. Gentleman may seek to minimise what has been done, but when this Government took office, the number of people receiving invalid care allowance was less than 10,000. It is now well over 100,000 and that is making a substantial contribution. That, together with the other improvements that we have made, including the increased earnings disregard for those on invalid care allowance, which was introduced last April, and the carers premium, which is being introduced this month, show our real concern to help those about whom the hon. Gentleman is also rightly concerned.

Mr. Conway: Will my right hon. Friend remind the House about the change of provision for those requiring full-time care who are suffering from terminal diseases such as cancer? Will he also pay credit to organisations like the Macmillan nurses, which enable those suffferers to have dignity in their own homes at that stressful time and which very much welcome the changes the Department is making to ensure that help arrives in time and is worth while?

Mr. Newton: I should very much like to join in that tribute and I met a Macmillan nurse in my constituency on Saturday. The contribution made to the support of carers, which goes well beyond the social security system, is an important and encouraging feature of what is happening in our health and social services.
With regard to my hon. Friend's first point, I am delighted that we have been able to extend attendance allowance, without the old time limit, to the terminally ill. My hon. Friend might like to know that we expect 6,000 successful awards of invalid care allowance—in other words, a further increase in recipients of that benefit—to follow the extension of attendance allowance.

Dr. Godman: Will the Minister assure the House that he will do his level best to ensure that applications for that allowance are assessed as quickly as possible? At my surgeries I have found that informal carers have had to wait far too long for the assessment of their applications. Will the Minister look again at the too-harsh criteria by which such applications are assessed by his officials?

Mr. Newton: I am always looking for ways to improve that and other parts of the social security system. I shall bear in mind what the hon. Gentleman has said. With regard to the first part of the hon. Gentleman's question, I can give him an unequivocal yes. There is no doubt that delays in processing ICA, partly because of the rapid expansion of the benefit, became longer than we wished and we will continue to do everything possible to reduce them.

National Insurance

Mr. David Nicholson: To ask the Secretary of State for Social Security what is the latest estimate of the number of standard rate taxpayers who would be affected by the abolition of the upper earnings limit on national insurance contributions.

Mr. Newton: If the upper earnings limit for employees' national insurance contributions were removed, about 3·3

million people would pay more contributions, of whom about 2·1 million would be standard rate taxpayers and about another 500,000 self-employed people, of whom about 200,000 would be standard rate taxpayers, would pay more contributions if the upper profits limit were also removed.

Mr. Nicholson: I am grateful for that valuable information, which my hon. Friends and I will certainly wish to use in the coming months. Does my right hon. Friend recall a previous occasion when rash and extravagant promises were made to sections of the electorate as bribes by the Labour party and then, once the Labour party had obtained power, those electors paid for those promises in higher inflation and taxation? Does my right hon. Friend believe that the British people will be taken in yet again?

Mr. Newton: I certainly do not believe that the British people will be taken in by a number of the things that were said in Blackpool 10 days ago and on several other occasions by the hon. Members for Oldham, West (Mr. Meacher) and for Birmingham, Ladywood (Ms. Short). It is relevant that the figures that I have just given the House clearly show how spurious was the attempt to pretend that basic rate taxpayers would not face extra bills as a result of Labour party policy.

Mr. Meacher: As the abolition of the upper earnings limit is intended to finance a desperately needed pension increase, is the Secretary of State ashamed that the 2 million poorest pensioners, who have no income but the state retirement pension or income support, have had a zero increase in their pension in real terms over the past 11 years? Is the right hon. Gentleman or the Prime Minister proud that, since 1979, all tax cuts to the rich have been paid for as a result of the Tory Government's breaking of the uprating link with earnings? Given that the Government have purloined £22 billion owing to pensioners over the past 11 years, is not it about time that the Government gave priority to the poorest pensioners rather than to the richest taxpayers?

Mr. Newton: The hon. Gentleman has not only a rare talent for hyperbole but a very short memory indeed. It is just a year, almost to the day, since the present Government put £200 million extra public money into increasing premiums in the income support system for older and more disabled pensioners. That is a clear indication of our concern to improve their position.

Disabled People

Sir David Price: To ask the Secretary of State for Social Security if he will make a statement about spending on disabled people since 1979.

Mr. Scott: Social security help for long-term sick and disabled people has increased in real terms by more than £4 billion since 1978–79 to a total of £8·3 billion in 1989–90. The proposals we outlined in "The Way Ahead", along with the changes announced in October 1989, will add some £300 million by 1993–94 and will give extra help to an estimated 850,000 people.

Sir David Price: Does my right hon. Friend accept that it would be churlish of the House not to acknowledge the improvements that he and his colleagues have made? Does


he accept also that we have a long way to go before any of us can feel really satisfied that we are doing right by our disabled brethren and sisters? Will my right hon. Friend therefore acknowledge that many hon. Members, including myself for as long as I am in this House, will come back, like Oliver Twist, asking for more for the disabled until we feel that justice is really done?

Mr. Scott: I certainly agree that there are continuing needs for disabled people, despite the dramatic improvements that have been made over the past 10 years. They are not restricted simply to benefits. We also need a more co-ordinated approach to services for disabled people, improved access to our public buildings, and further efforts to bring technology to the service of people with disabilities.

Pensioners' Incomes

Mr. Robert G. Hughes: To ask the Secretary of State for Social Security what is his estimate of the latest trend in pensioners' real incomes since 1979.

Mrs. Gillian Shephard: I am pleased to be able to tell my hon. Friend that the latest available information shows that pensioners' average total net incomes grew by over 31 per cent. in real terms in the Government's first eight years of office.

Mr. Hughes: I thank my hon. Friend for her reply. Does she agree that it is very good news for pensioners? They will now know that, over a long period, the Government have taken seriously the standard of living of pensioners. Does my hon. Friend agree also that people who are just above benefit level are nevertheless living on small amounts of money and that, therefore, it is right that the Government should concentrate help on them and not make promises such as those made by Labour Members which they know that they cannot keep?

Mrs. Shephard: My hon. Friend is right when he says that there is a need to target help for pensioners, as for other groups. Pensioners with incomes from savings have seen their incomes increase by 130 per cent. Occupational pension income has also gone up, by 77 per cent. in that time. However, the Government are conscious that not all pensioners have been able to benefit from those increases in income, and that is why my right hon. Friend the Secretary of State has just drawn the attention of the House to the £200 million package last year which helped 2·6 million pensioners.

Mr. Campbell-Savours: May we have an assurance that in next year's uprating of social security benefits and pensions the calculation will be based on this year's September year-on-year retail prices index? May we have an unconditional assurance on that matter from the Dispatch Box?

Mrs. Shephard: The hon. Gentleman knows that the current historical method of calculating upratings ensures that the benefits are protected against price increases over a measured period. In years when inflation falls after the new rates are set pensioners gain—that will be the case this year.

Benefit Payments

Mr. Knapman: To ask the Secretary of State for Social Security what assessment has been made of the effect on financial incentives to work of changes over the past five years in social security benefit payments.

Mrs. Gillian Shephard: One of the major aims of our policies in social security has been to maintain and, where possible, improve financial incentives to work, and we are constantly monitoring the effects of policy changes in this area.

Mr. Knapman: Does my hon. Friend agree that, as a result of our reforms, help is being targeted to where it is most needed and that, in particular, low-paid and wage-earning families cannot be worse off now because they work?

Mrs. Shepard: I agree. We have reformed the income-related benefits and restructured national insurance. We have also improved earnings disregards. By those means we have virtually eliminated the worst effects of the poverty trap and considerably alleviated the unemployment trap.

Oral Answers to Questions — ATTORNEY-GENERAL

Hilda Murrell

Mr. Dalyell: To ask the Attorney-General if he will make a statement on his actions in relation to the investigation by West Mercia police into the case of Hilda Murrell.

The Attorney-General (Sir Patrick Mayhew): As I informed the hon. Gentleman on 6 September, the Director of Public Prosecutions has decided that the available evidence in this case is insufficient to sustain a charge of murder against any person and has notified the chief constable of West Mercia accordingly. My own actions have been restricted to answering the hon. Gentleman's questions regarding the matter and writing to him to inform him of the Director's decision.

Mr. Dalyell: May I ask the Attorney-General a careful question of which I have given him notice? In the light of the convictions of Mr. McKenzie in respect of two murders based on his own confessions, why has the decision been taken not to prosecute him for the alleged murder of Hilda Murrell based on his own confession?

The Attorney-General: Mr. McKenzie was convicted of manslaughter on the ground of diminished responsibility, not of murder. The convictions are currently the subject of an appeal by Mr. McKenzie and are therefore sub judice. In the Murrell case further lines of inquiry suggested by the Director of Public Prosecutions did not produce evidence warranting the prosecution of Mr. McKenzie.

Mr. Fraser: Does the insufficiency of the evidence mean that the police are therefore looking for another suspect?

The Attorney-General: It means that there is no evidence sufficient to warrant a prosecution against anybody and, therefore, the case remains open.

Government Documents

Mr. Kennedy: To ask the Attorney-General if there are any plans to review the guidelines to Government Departments for the selection of documents for permanent preservation by the Public Record Office,.

The Solicitor-General (Sir Nicholas Lyell): No, Sir. The guidelines on the selection of public records for permanent preservation are kept under review by the Public Record Office, for which the Lord Chancellor has ministerial responsibility. There are no current plans to make any alterations of substance to the guidelines.

Mr. Kennedy: May I bring to the attention of the Solicitor-General the written answers from each Government Department that were given to my hon. Friend the Member for Southport (Mr. Fearn) earlier this year? With the single exception of the Department of Trade and Industry, those Departments evaded answering directly what percentage of their files were passed on intact to the Public Record Office. The DTI admitted that, in 1989, under 5 per cent. of its files were passed over intact. Surely that suggests, once again, excessive secrecy at the heart of Whitehall. Should not more of those files be made available in their full form for the purpose of future records? Does the Solicitor-General recognise that, contrary to his response to my question, the shortfall in the number of intact files passed on highlights the need for a review of the system?

The Solicitor-General: I doubt whether that figure conveys the full picture. A large number of such files deal with personal instances, which are simply too numerous to be maintained in the public records. I find it hard to believe that the 5 per cent. figure arises except from the fact that the great majority have to be destroyed after 30 years. The guidelines are updated about every 10 years; they were updated in 1958, 1962, 1971 and 1983, and can be expected to be updated in about three or four years' time.

Mr. Beaumont-Dark: Does my right hon. and learned Friend accept that I was amazed, if not astounded, when a constituent of mine who had been a prisoner-of-war in 1940–50 years ago—was told that he could not obtain his records for at least another 25 years because of state security? Is it possible that, in the world in which we live, 50 years on is too short a time and everybody has to wait 75 years before they can have the records of what they said then? How can such records in any way affect state security?

The Solicitor-General: If my hon. Friend looks at "Modern Public Records", the White Paper published in 1982, he will see that it explains the criteria for the selection of such records. Obviously, I do not know the position of my hon. Friend's constituent. It might well be that his records had been destroyed simply on the basis that they were personal.

Mr. Beaumont-Dark: No.

Mr. Skinner: Why do not the Government bring the records really up to date and release the record of the statements and conversations between the ex-Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and the Foreign Secretary? Why do not they release those statements today to clear up the arguments that we hear between those two?

The Solicitor-General: The hon. Gentleman looks fit and well, and I am sure that in 30, 40 or 50 years' time he will enjoy reading those records.

Oral Answers to Questions — SOCIAL SECURITY

Community Care

Mrs. Mahon: To ask the Secretary of State for Social Security what proportion of applications for community care grants were refused in 1988–89, 1989–90 and the first half of 1990–91.

The Minister for Social Security and Disabled People (Mr. Nicholas Scott): The proportion of community care grants refused in 1988–89 was 48 per cent., in 1989–90 it was 54 per cent. and in the period April to August 1990 it was 55 per cent.

Mrs. Mahon: I am sure that the House will agree that those are disgusting statistics. Is the Minister aware that those shameful statistics represent people in need who, under the old system, would have been entitled to something? What preparations will be made and what money will be put into the system to meet the needs of the people who will be caught up in the imminent recession?

Mr. Scott: Only 4·4 per cent. of applications for community care grants were turned down because they were of insufficient priority—the substantial majority were turned down because they did not meet the basic eligibility test for the community care grant system. The statistics that I read out should be seen against the background of an increase of 66 per cent. for applications for community care grants and an increase of 50 per cent. in awards.

Mr. Dickens: Is not it a fact that the grants have to be examined very closely indeed because the Government are the custodians of taxpayers' money, and taxpayers do not have a bottomless pit of money? Therefore, the Government's policy of directing resources and targeting them closely on where they are needed is right and preserves the taxpayers' rights.

Mr. Scott: Of course we must be careful and prudent with the taxpayers' money. We also have to be careful to meet need where it exists. Some 500,000 community care grants have been given and effectively targeted since the introduction of the scheme.

Child Benefit

Mr. Wallace: To ask the Secretary of State for Social Security if he will make it his policy annually to uprate child benefit in line with inflation.

The Secretary of State for Social Security (Mr. Tony Newton): I will continue to carry out my statutory duty by reviewing the rate of child benefit annually and considering its future level in the light of all the relevant circumstances.

Mr. Wallace: I thank the Secretary of State for that reply, which I could scarcely describe as helpful. He knows that this question comes up annually and will not go away, because of the serious way in which inflation has eroded the real value of child benefit over many years. That benefit is well directed to help families, and has almost a 100 per cent. take-up. Given the current rate of inflation,


will the Secretary of State accept that if the Government are to be true to their claim to be the party that supports the family, we need something much more positive than the answer that he has just given?

Mr. Newton: I think that the hon. Gentleman knows full well the reason for the answer that I gave, precisely because it is this particular time of year. Having been pursued around Bournemouth last week at intervals by people inviting me to speculate on this self-same subject—and, finally, having drawn from one of our most distinguished television political commentators the remark, "It sounds as if even your 'no comment' is off the record"—I do not propose to be drawn further this afternoon.

Disabled People

Mr. Paice: To ask the Secretary of State for Social Security what is the latest estimate of the numbers of people who will benefit from the measures outlined in "The Way Ahead".

Mr. Scott: We estimate that some 850,000 people will benefit from the proposals set out in "The Way Ahead" and the interim measures that we announced in October 1989.

Mr. Paice: Does my right hon. Friend agree that that extra number of people, and the extra £300 million to be spent on implementing the proposals—on top of the fact that we have doubled expenditure in real terms on the long-term sick and disabled since 1978–79—demonstrate clearly that this Government are the caring Government, and that those who would say otherwise have failed when they have had the chance to prove it?

Mr. Scott: Certainly I agree. One of the most interesting statistics—using money at constant prices—shows that the last Labour Government managed to increase spending on the long-term sick and disabled by some £220 million a year; we have increased it by £370 million.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Tropical Forests

Mr. Wallace: To ask the Secretary of State for Foreign and Commonwealth Affairs if he has any plans to review the operation of the tropical forestry action plan; and if he will make a statement.

The Minister for Overseas Development (Mrs. Lynda Chalker): We have endorsed the strengthening and reform of the tropical forestry action plan—the TFAP—called for by the independent review of the plan commissioned by the United Nations Food and Agriculture Organisation—the FAO. We are working to see reform implemented; a good start was made at the FAO's committee on forestry last month.

Mr. Wallace: The plan has perhaps been a disappointment, although we recognise that it was set up in good faith and with good objectives. The right hon. Lady has been quoted as saying that she will not let up pressure to change it; will she tell us in which direction she would like the change to move? Does she agree that the

local pressures for the exploitation of the forests can be abated only if, at the same time, we tackle the fundamental problems of poverty, trade and aid?

Mrs. Chalker: The local problems of forestry are uppermost in our minds. We seek to tackle sustainable development and the whole question of the poverty of those people living in the forest. As part of the reform we have urged strongly—and I have got my EC colleagues to do likewise—that the forest people should be involved in the plans for forestry. The review called for a greater priority for the tropical forestry action plan within the FAO. The TFAP covers 81 countries, and is far more than the FAO. We have asked for revised guidelines for clearer aims and objectives. We also asked, as did the review, for better collaboration among the co-financing organisations—the World Bank, the FAO and the World Resources Institute. We have asked for increased and more timely resources to strengthen tropical forestry countries' own ability in planning policy expertise and implementation. We now await the meeting in November of officials of the FAO to see those reforms implemented in full.

Mr. Jacques Arnold: Are not there more ways than one of assisting the preservation of the tropical rain forest? Should not we be looking beyond merely this action plan to the bilateral work that Britain has been doing in assisting the Latin American countries in the Amazon basin in preserving their rain forests? Will my right hon. Friend commend the project that is now going ahead in Brazil?

Mrs. Chalker: I most certainly commend that project, and I hope to visit Brazil at the end of this month. Britain now has some 200 projects under way or in preparation at a cost to the aid programme of £160 million—56 of those are through non-governmental organisations concerned with the environment, and 40 are research programmes. There are many ways in which we can help the environment further and my hon. Friend will find them in "Environment and British aid programme" and chapter 4 of "This Common Inheritance".

Mr. Dalyell: What is the time scale for the reform, particularly as the position is extremely urgent—as the Minister knows—for Sarawak and Sabah and the rest of the islands of Borneo?

Mrs. Chalker: I hope that the reforms will be in place by early next year. As the hon. Gentleman knows, there is some concern—that I share—that the FAO has been resistant to the types of changes that are wanted by all the donor countries. Given that there was such unanimity in the committee on forestry which met in September in Rome—I have put it on the EC development committee's agenda for the beginning of November—I have some hope that we will see fast implementation and then implementation in national forestry programmes, which is what the hon. Gentleman wants.

Developing Countries

Mr. Paice: To ask the Secretary of State for Foreign and Commonwealth Affairs what fresh measures he is proposing to assist developing countries to deal with environmental problems.

Mr. Summerson: To ask the Secretary of State for Foreign and Commonwealth Affairs what fresh measures he is proposing to assist developing countries to deal with environmental problems.

Mrs. Chalker: We have launched initiatives to develop new bilateral projects and to promote new multilateral measures in relation to environmental concerns such as forestry, energy efficiency, biological diversity, the ozone layer, and climate change.
Our policies are set out in the White Paper on the environment and in the ODA booklet "The Environment and the British Aid Programme".

Mr. Paice: Does my right hon. Friend agree that the opportunity that many of us have recently had to visit countries in eastern Europe demonstrated to us the importance of developing countries assuming a capitalist economic system to meet their environmental imperatives, such as sustainable management of the rain forests? What support is her Department giving to the World Conservation Monitoring Centre in Cambridge and to its work in supporting our overall objectives?

Mrs. Chalker: We do indeed support the World Conservation Monitoring Centre. It is supplied jointly by the International Union for Conservation of Nature and Natural Resources, the United Nations Environmental Programme, the World Wide Fund for Nature and ourselves. The centre has an important continuous function of collection, analysis, interpretation and dissemination of data, and we have involved it in our tropical managed areas assessment project. On our behalf, it is giving advice to the Government of India on conservation monitoring; it is preparing a manual on centres of plant diversity; it is involved in the biological diversity status report; and it is doing work on the conservation and management of biodiversity.
The centre is a thoroughly excellent organisation, supported not just by us but by worldwide organisations.

Mrs. Clywd: What assistance does the Minister propose to give to Cambodia, with its considerable environmental problems, which include landmines that are daily killing and maiming innocent people? Can she tell us whether British forces were in any way involved in training those who laid the mines, as some people allege; and what military and other expertise we can now give the Cambodian men, women and children to de-mine thousands of square miles of their country's land which are virtually unusable because they are unsafe?

Mrs. Chalker: That has nothing to do with the original question. The hon. Lady will find that I have answered today a question on Cambodia asked by my hon. Friend the Member for Broxtowe (Mr. Lester). We are indeed concerned, and we are giving additional help to the non-governmental organisations to help civil-war-displaced persons in Cambodia.
The question that the hon. Lady has asked has nothing to do with me and it contains no fact. It is purely part of her campaign to discredit honourable people, including a very honourable member of the Foreign and Commonwealth Office whom she attacked at the Labour party conference, who cannot answer for himself and about whom she and her hon. Friend the Member for Sunderland, South (Mr. Mullin) have made disgraceful allegations which are untrue.

Mrs. Clwyd: rose—

Mr. Speaker: Order.

Emergency Relief

Mr. John Marshall: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on emergency relief aid expended under the United Kingdom's aid programme.

Mrs. Chalker: Providing immediate and effective humanitarian assistance is one of the key areas of the aid programme. Last year we spent more than £61 million in disaster relief, help for refugees and emergency food aid.

Mr. Marshall: Does my right hon. Friend realise that her answer will be warmly welcomed, and that her warm-hearted response to the problems of these countries is supported by the vast majority of people of this country?

Mrs. Chalker: I thank my hon. Friend for his comments. The outlook in Ethiopia for next year is bleak. The FAO and US Agency for International Development crop assessment mission will give donors more detailed reports at the end of next month. Meanwhile, I have just announced 19,000 further tonnes of food aid for Ethiopia through the World Food Programme; a further 5,000 tonnes of cereals to the NGO CARE; £500,000 to the Save the Children Fund for the purchase of trucks and spares for the southern line operation; and £600,000 worth of vegetable oil to the UNHCR for Somalian and Sudanese refugees in Ethiopia. We shall continue to monitor the situation extremely carefully and provide further help. Our total emergency aid for Ethiopia so far this year is more than £16·5 million.

Population Growth

Mr. Mans: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the contribution made by United Kingdom aid towards reducing growth in the world's population.

Mrs. Chalker: Helping to reduce rapid population growth has high priority in our aid programme. I aim to increase the level and quality of all population-related assistance. We will focus bilateral support on a number of countries to improve the quality and delivery of their family planning services and to improve the health, education, income and status of women.

Business of the House

The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): With permission, Mr. Speaker, I should like to make a short business statement about the business of the House on Friday. The business for Friday 19 October will be as follows:
A debate on the transitional measures relating to the EC consequences of German unification on a take-note motion. Relevant documents will be shown in the Official Report. [See Written Answers to Questions tomorrow.]

Mr. Derek Foster: I thank the Leader of the House for the business statement and also for arranging for the Chancellor to make a statement this afternoon on the exchange rate mechanism.
Since the decision to enter was clearly taken for political reasons, will the right hon. and learned Gentleman use his full authority to drag the Prime Minister to the Dispatch Box in a full debate next week to explain her Government's deep divisions over Europe? Will he arrange for the Foreign Secretary to make a full statement on his return on the latest developments in the Gulf crisis and on his consultations about the United Nations' resolutions on the shootings?

Sir Geoffrey Howe: I shall leave the hon. Gentleman's first point to be dealt with on its merits through the usual channels. I appreciate his gratitude for the fact that the Chancellor of the Exchequer will make a statement about the exchange rate mechanism immediately following this one. The House will know that my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs is currently in the middle east. I shall bring to his attention the points raised by the hon. Gentleman. The question of a statement or a possible statement can most usefully be considered when my right hon. Friend returns to Britain.

Several Hon. Members: rose—

Mr. Speaker: Order. I remind the House that questions on this statement should be confined to the business on Friday.

Mr. Alan Williams: Does not the Leader of the House realise that his statement is totally inadequate? My hon. Friend the Member for Bishop Auckland (Mr. Foster) is absolutely right. During the recess, we had one of the most important economic statements in recent years and as this is a quiet week, Friday should have been used for a debate, led by the Prime Minister, in which she could have explained this extremely important decision. More importantly, she could have explained the differences between herself and the Chancellor and the Foreign Secretary in their perceptions of the long-term significance of ERM membership. Perhaps, in winding up, the Leader of the House could have explained the difference between himself and all three of them on the long-term implications.

Sir Geoffrey Howe: The right hon. Gentleman has got it completely wrong. The less questioning that takes place now about the statement that I have just made, the more quickly the House can get on to discuss with the Chancellor of the Exchequer the statement that he will make on the point raised by the right hon. Gentleman. It is idle to pretend that the subject that I have announced for

debate on Friday is unimportant. We shall debate transitional measures following the conclusion of the conflict with Germany and German unification. These are important matters and it is right to discuss them on Friday.

Mr. Peter Bottomley: If my right hon. and learned Friend rejects the blandishments of the hon. Member for Bishop Auckland (Mr. Foster) and our right hon. Friend the Prime Minister does not speak, does that mean that we would not have to listen to the Leader of the Opposition? Many of us would be happy with that. If there is an additional gap on Friday and I were to table an early-day motion in support of my right hon. Friend the Prime Minister's expressed views in 1981 to 1983 on child benefit, would there be time to discuss that? It would be a useful debate.

Sir Geoffrey Howe: My hon. Friend's enthusiasms are well known, but they do not relate directly to the business of the House on Friday.

Mr. Nigel Spearing: Will the Leader of the House confirm that the documents that he mentioned relating to Friday's debate constitute some 23 individual proposals, for each of which the Government have provided an explanatory memorandum? Will he further confirm that, if the Select Committee on European Legislation believes that any one of those documents should be considered on its own, those documents will not be deemed to have been dealt with in one debate on Friday?

Sir Geoffrey Howe: I understand the hon. Gentleman's close, serious and professional interest in these matters. The documents are summarised in paragraphs 6 and 7 of Cmnd. 1246—the Government's observations on the report of the Foreign Affairs Committee on German unification. I know that the Scrutiny Committee will be considering these matters tomorrow, and the precise shape of next Friday's debate may take account of the hon. Gentleman's recommendations, although I cannot promise to meet him in precisely the way that he suggested.

Mr. Tony Banks: Which Ministers will be involved in the debate? Will the Leader of the House use his good offices with Mr. Speaker to ensure that the right hon. Member for Cirencester and Tewksbury (Mr. Ridley) can play a full part in the debate?

Sir Geoffrey Howe: The hon. Gentleman, as always, has more than one objective in mind. The appropriate Ministers will speak in the debate, no doubt including at the outset a Foreign Office Minister. The question of who else will speak in the debate is entirely a matter for Mr. Speaker.

Mr. Bob Cryer: May we have a statement on Friday, or earlier if possible, on the substance of the Central Television programme on Cambodia, which demonstrated beyond challenge that the Government are giving aid and comfort to the Khmer Rouge, including the Pol Pot faction? Is not that small, impoverished country, which threatens nobody, being virtually squeezed out of existence? Is there not the possibility of mass annihilation if Pol Pot and his faction reach the capital, which they are likely to do within the next few months?

Sir Geoffrey Howe: The hon. Gentleman is tenacious, but absurd in his continued tenacity. The Government have many times denied the allegations to which he referred, and there is no substance to them.

Several Hon. Members: rose—

Mr. Speaker: Order. I shall call the two hon. Members who are standing, but I ask them to confine their questions to what is likely to happen on Friday, and not to discuss more general issues.

Dr. Norman A. Godman: It is right and proper that on Friday we should debate the unification of Germany. However, at the risk of sounding excessively parochial, I must stress that the unification of Germany has profound implications for, among others, those who live in our maritime communities. I hope that, on Friday, the appropriate Minister will offer a comment or two on the role that will be played by a grossly enlarged German fishing fleet and the consequences for the interests of our fishing communities.

Sir Geoffrey Howe: Certainly, in so far as that issue may emerge from the documents to which I have referred, it will be an appropriate subject for the hon. Gentleman to raise in the debate on Friday.

Mr. Dennis Skinner: Why does not the Leader of the House admit that the real reason why the Prime Minister will not reply to the debate on Friday, or on any other day, is because the right hon. and learned Gentleman cannot guarantee a 10-minute standing ovation before she begins?

Sir Geoffrey Howe: I suspect that, if challenged, I could.

Exchange Rate Mechanism

The Chancellor of the Exchequer (Mr. John Major): I should like to make a statement about sterling's entry to the exchange rate mechanism of the European monetary system, which took effect on Monday, 8 October.
Sterling now has a fixed central rate against each of the other currencies in the ERM. The entry rate is set against the ecu and translates to a central rate against the deutschmark of DM 2·95. That was marginally above the market level when the decision to enter was announced on Friday, 5 October and is a little below the current market rate.
Sterling is able to move by a maximum of 6 per cent. above or below the central rates. Our choice of the wider 6 per cent. margins is intended to allow sterling to settle into the system, and follows recent precedent. In due course, we will move to the narrow band of 2¼ per cent. margins. The terms of entry we have agreed with our partners are those that we sought.
The Government have long made it clear that sterling would enter the exchange rate mechanism during stage 1 of economic and monetary union, which began in July. It has now done do, at the earliest appropriate time. I would like to explain how our decision fits into the Government's wider economic strategy.
It has become abundantly clear that policy is now reducing inflationary pressures in the economy. Monetary growth on all measures has fallen sharply, and the growth of narrow money is within its target range. The growth of demand has slowed. Although the rise in oil prices will continue to feed through for a while, the prospect is for a substantial reduction in inflation over the coming year. That will be so both in absolute terms and in relation to inflation in other European countries. It was for those reasons that we felt able to reduce interest rates by 1 per cent.
A firm exchange rate is a vital part of our policy to maintain tight monetary conditions in order to reduce inflation. As I have repeatedly made clear, membership of the exchange rate machanism will be an additional discipline for the United Kingdom economy. In no sense is it a soft option. Monetary policy will remain tight. I must emphasise that I will not make a further reduction in interest rates until I am sure that it is safe and prudent to do so.
Membership has important implications for British companies and their employees. They must contain their costs. If they fail to do so, they will not be bailed out by a devaluation of the currency. That is the key message for those engaged in pay bargaining this autumn and subsequently.
But in addition to acting as a discipline on costs, membership of the exchange rate mechanism offers significant benefits for British industry. It will help to provide greater stability of exchange rates with our main trading partners and thus the certainty that business needs to plan for the future. It will also make Britain even more attractive for inward investment.
Although entry to the narrow band of the exchange rate mechanism will fulfil our obligations under stage 1 of economic and monetary union, it does not imply any change in our opposition to the imposition of a single currency. In the intergovernmental conference in


December, we shall continue to argue against that plan and for the proposals that I first set out in June. As the House knows, they propose an evolutionary and market-based approach, based on the creation of a new European monetary fund and a common currency—the hard ecu.
In summary, the mechanism has a proven record of success over recent years in producing greater stability of exchange rates and lower inflation. The Government believe that Britain too will benefit from membership. The exchange rate mechanism will reinforce our counterinflationary policies, help to provide the stability and certainty that industry needs, and set the right framework for a resumption of soundlybased and non-inflationary growth. I commend entry to the House.

Mr. John Smith: As the Chancellor is aware, the Labour party welcomes the decision that sterling should join the exchange rate mechanism, not least because of the potential benefit that a more stable exchange rate could bring to the process of Britain's much-needed economic recovery. However, it will not of itself lead Britain out of the economic cul-de-sac of high and rising inflation, recession, increasing unemployment and serious balance of payments deficits to which the Government's policies have led.
I want to ask the Chancellor first about the celebrated Madrid conditions into which the Prime Minister entered in June 1989, and which she reported to the House formally on 29 June last year. At that time, the Prime Minister was in no doubt that the rate of inflation was too high for Britain to enter the exchange rate mechanism. In a reply to a question from my right hon. Friend the Leader of the Opposition, she said:
On the exchange rate mechanism, our promise has been that we would go in when the time was right. I"—
note, "I"—
put conditions on that and made it much clearer that when those conditions were met we should be able to go in. One condition depends on us, which is that we get inflation well down".
Earlier, she said:
we must first get our inflation down."—[Official Report, 29 June 1989; Vol. 155, c. 1111, 1110.]
Every time that she has been asked since then, the Prime Minister has repeated the condition. In July 1989, inflation was to be "significantly lower". The Chancellor said on 26 March this year:
we wish to see inflation fall before we enter the mechanism."—[Official Report, 26 March 1990; Vol. 170, c. 117.]
Only two weeks ago, the Prime Minister was reported as saying in Switzerland:
The Madrid conditions won't be changed and they include getting inflation nearer the European average.
The Prime Minister's role is crucial—she invented the Madrid conditions. They were not imposed on her by other members of the European Community. The present Chancellor was not in Madrid when these conditions were suggested by the Prime Minister, and neither was his predecessor, the former Chancellor. It was the Prime Minister herself, assisted by the then Foreign Secretary, who is now Leader of the House, and who accompanied her to the Madrid summit. Sadly, his views do not seem to coincide with those of the Prime Minister or of the present Chancellor.
But if the condition is clear—and it could hardly be made more clear—that inflation had to be reduced before we entered the exchange rate mechanism, it is equally clear that it has not been fulfilled. Headline inflation in June 1989 was 8·3 per cent. and is now 10·9 per cent. If we take inflation on the basis that the Chancellor likes to take it—by excluding completely mortgage rates and the poll tax, which is a favourable estimate from the Government's point of view—then, it was 5·8 per cent. and now, it is 7·9 per cent.
I ask the Chancellor to explain why there has been such a humiliating U-turn by the Prime Minister who was the inventor of the Madrid conditions and is now their arch-destroyer. Is it not simply because the Government, due to their appalling mismanagement of our economy, have been forced to concede that they could not achieve the inflation target which they had set for themselves?
Why does not the Chancellor admit this in his statement to the House, on television and elsewhere? Why does not the Prime Minister—whose role is so crucial in this affair that she must take part in the debate which we hope to have in the House—admit it? If our parliamentary accountability is as important as she frequently claims in this context, why is she reluctant to take part in the debate? Is it not because she would find it impossible to justify the abandonment of a commitment that she made to the House on 29 June last year?
Would not the Chancellor have been wiser to admit that our economy is in dire trouble, rather than to pretend, as he did once again today, that all would soon be well and to claim, as he did on Channel 4 television on the day of his announcement, that at that time there was
an ideal conjunction of events
Ideal, when inflation was twice as high as that in the rest of the countries in the exchange rate mechanism? Ideal, when the economic consequences of the Gulf crisis are quite unknown? If these conditions were ideal, what were the Government waiting for during all the years when inflation was low and during all the years when there was no Gulf crisis?
Does the Chancellor not understand that nonsense like this not only fuels scepticism in the markets and elsewhere, but fosters downright incredulity about statements by Ministers? Is is not clear that the Government, baulked and cornered by their economic failure, have joined the exchange rate mechanism as a last resort?
Now that Britain has joined, will the Chancellor give us his estimate of the consequences for our economy? I hope that he will answer these questions directly. Given our serious balance of payments problems, is it his judgment that the rate at which we agreed to join is sustainable? What is his estimate of the effect on the balance of payments over the period ahead? Will the balance of payments deficit be progressively reduced? Is he satisfied that the arrangements through the central banks under the Basle-Nyborg agreements will be adequate to sustain the management of a currency as widely traded as sterling? Why did he not seek a strengthening of regional policy in the Community as one means of helping to bridge the gap between countries with more successful economies and countries, such as Britain, which are in difficulties?
Finally, I wish to ask the Chancellor—[Interruption.]

Mr. Speaker: Order.

Mr. Smith: This is an extremely important matter of economic and political policy, and the Government should


not complain when they are asked questions by an Opposition whose function it is to do precisely that. The questions that I want to ask the Chancellor flow from how economic policy is to be directed now that we are subject to the disciplines of the ERM.
First, is it not clear that, between now and the next election, responsible economic management will not permit cuts both in interest rates and in personal income tax? To build confidence over the period ahead, will the Chancellor today rule out the possibility of personal income tax cuts before the general election as too wildly irresponsible to be seriously contemplated by any sensible Government? Does he not yet understand that, in the new situation, the supply side policies advocated by this side of the House are even more crucial? Unless we end the debilitating neglect of trading, the collapse of regional policy and the failure to advance new technology—in short, unless we adopt an industrial strategy—is it not clear that we shall not succeed within the ERM, just as we have failed outside it?

Mr. Major: I am grateful to the right hon. and learned Member for Monklands, East (Mr. Smith) for his initial welcome for our decision. We both agree that it is the right decision for the British economy. He spent so much time on the Madrid conditions because he knows that we are right to enter the mechanism. As recently as a few weeks ago, he said:
We believe that we should enter the ERM at an early date.
The Government agree with him, and we have done so.
Several conditions were set out in Madrid. The first concerned the abolition of exchange controls, which is substantially completed. The second related to the single market, and the majority of the measures are now concluded and more are in hand. The third related to progress on financial services, which is also nearly concluded. The fourth was progress on competition policy, on which the Commission, on this at least is acting firmly. The only remaining condition was the need for inflation convergence, and it is now clear that we are moving away from divergence in inflation to convergence in inflation. [Interruption.] If the hon. Gentlemen listen longer, they will learn a little more.
The right hon. and learned Gentleman then asked why we were waiting for a conjunction of events and what they might be. We were waiting essentially for three events: first, the right market conditions and the right market rate, and that we had; secondly, a clear indication that monetary aggregates were coming into line, and that they have; thirdly, signs in the real economy of close and certain disinflation, and that we had. The combination of those factors made this the right time to enter the mechanism.
The right hon. and learned Gentleman asked about the consequences for the economy. The first and most certain consequence is that entry of the ERM will reinforce monetary policy and help us push inflation lower, which is our central policy aim. He asked whether the rate was sustainable, and I share his view that that is an important question. I am confident that a central rate of DM2·95 is sustainable, for a series of reasons which I will set out now, if the House will do me the courtesy of listening.
First, DM2·95 is the average inflation-adjusted real rate of the past decade. It is the recent market rate and, as a number of analysts have pointed out, the pound's purchasing power parity—in essence, the rate at which the

prices of our goods would be equal to the prices of German goods—is above DM2·95. Three analysts have calculated it specially: one at DM3·30, one at DM3·19 and one at DM2·95. Similarly, as the right hon. and learned Gentleman may know, the International Monetary Fund has released figures that suggest that industry will be competitive at DM2·95.

Mr. Ron Leighton: When has it ever been right?

Mr. Major: When has the hon. Gentleman ever been right?
I understand the concern that underlies the question. The truth is that the trade gap is the result of domestic demand outstripping supply and not an uncompetitive exchange rate. That is the reality of what has happened.
The right hon. and learned Gentleman's next question concerned the central banks. I am content that the central bank agreement is satisfactory and I think that the right hon. and learned Gentleman is aware of that. I did not regard stronger regional policies as necessary or negotiable in my discussions with my partners in Europe.
On the responsibility for future economic management, the right hon. and learned Gentleman referred to the possibility of interest rate cuts and tax cuts. I made clear a few moments ago the position on interest rate cuts. Tax cuts are a matter for the Budget and not before.

Mr. Terence Higgins: My right hon. Friend the Chancellor is reported to have said that a remark by Mr. Delors that we joined the ERM in order to slow down EMU is "rather rum". Is that not a good description of Mr. Delors's position, given that we have been in the lead in implementing the single market and that my right hon. Friend's proposals for a hard ecu are a far more practical, effective and better way forward than Mr. Delors's proposals for stages 2 and 3?

Mr. Major: I am grateful to my right hon. Friend for those remarks. I agree entirely. The hard ecu moves us in the direction of a market-led approach, which I believe is the only sustainable way forward.

Mr. James Molyneaux: As Parliament—both sides of the House of Commons—has rendered itself impotent on these matters, is it not imperative that there should be no further erosion of Britain's position until the electorate have been consulted at a general election?

Mr. Major: With respect to the right hon. Gentleman, I do not agree with his underlying premise.

Sir William Clark: Now that the euphoria of the markets has subsided, will my right hon. Friend re-emphasise that joining the ERM is not a soft option, and that it is essential for us to keep tight monetary control? Does he agree that there has been a wide welcome for the fact that we do not agree with a single currency and that at the new meetings the hard ecu suggestion will be put forward?

Mr. Major: I certainly agree with my right hon. Friend's final point, and I confirm it. I think that the euphoria of the markets was overdone both before and immediately after entry and, in some cases, the gloom is


now being overdone. Entry into the exchange rate mechanism is an additional discipline to underpin monetary policy. It is that and no more.

Mr. Peter Shore: The Chancellor will be aware that this is one of the most serious decisions affecting the jobs and livelihoods of millions of people in this country. He maintains that he has got the right exchange rate. That view is not shared by the vast majority of experts, academics and others in this country.
I shall ask two questions. First, if it turns out that the right hon. Gentleman is wrong on this vital matter, what powers does he have left to change the exchange rate now that it has been agreed with the ERM? Secondly, now that we are part of the ERM, taking account of all he said about tighter discipline, will he spell out what average increase in earnings in the United Kingdom is compatible with retaining what competitiveness we have already?

Mr. Major: On the final point, it depends on the individual company and the individual company's productivity. On the substantive—[Interruption.] It is the question of averages that has got this country into so much trouble over the past 20 years. On the right hon. Gentleman's central point of jobs and livelihoods, the most important thing for jobs and livelihoods in the future is, first, to obtain a firm downward pressure on inflation and, secondly, to keep it. That is the central reason for entering the exchange rate mechanism.
On whether the rate is sustainable, I set out in some detail the arguments in favour of that a few moments ago. As to what opportunities will arise in the unlikely event of the right hon. Gentleman's next premise being correct, we intend to stay within the bands to which we have committed ourselves. That was the purpose of setting the bands in the first place.

Mr. William Cash: Does my right hon. Friend agree that the acid test is to ensure that the British economy is as competitive as possible, and in doing so to remind the right hon. and learned Member for Monklands, East (Mr. Smith) that the views and expressions of Mr. Tuffin, in repudiating any attempt to hold down wages, are a prescription for our not being competitive? Furthermore, does he agree that the views of Mr. Sam Brittan in the Financial Times that he hopes that British monetary policy will be made in Berlin must be repudiated?

Mr. Major: As my hon. Friend says, the wages round is important. Wage settlements above that which is affordable would have a short-term effect on inflation but a far more fundamental effect on the number of jobs in the economy. That, essentially, is the message that employers and employees must grasp when deciding what increases should be. As my hon. Friends know, we have committed ourselves to stay within the bands that we have set and we shall use monetary policy for that purpose.

Mr. Alan Beith: Does the Chancellor recognise that inflation and interest rates would have been lower in this country in the past year if we had been in the exchange rate mechanism a year or more earlier, when Labour opposed it as strongly as the Prime Minister? Will he explain how he and the Prime

Minister can continue to talk about tax cuts when the fiscal policy that may need to operate inside the exchange rate mechanism could require him to increase taxes in some circumstances? Does he rule that out? As the Prime Minister's objections to joining the exchange rate mechanism before inflation was down to the level of our partners have been blown away like confetti in a gale, may we hope that her objections to a single currency and a more independent European central bank will go the same way?

Mr. Major: On the last point, I think the hon. Gentleman is unlikely to see that, and I think that he is unlikely to see that among my right hon. and hon. Friends either. On his first proposition, that inflation would have been lower if we had been in the exchange rate mechanism, if the conditions had been there for us to have been in the exchange rate mechanism, the hon. Gentleman might have been right, because the inflationary record of countries within the exchange rate mechanism is better than those not in it. The conditions for entry were not present. A year or so ago, monetary aggregates were not falling and the real economy was not slowing. We were heading for a position where inflation was going up, not down. Clearly, one could not have entered then.

Mr. Teddy Taylor: Does the Chancellor recall that, when his predecessor joined informally, we had significant reductions in interest rates and inflation for several months, but a period of regular increases in interest rates to the present savage levels after that period of joy? That was apparently because Britain is almost unique in Europe in having a chronic balance of trade deficit with the EEC. Was not this confirmed by Hoare Govett, which has just published a splendid paper suggesting of the initial good news:
As with all magic, it is hocus pocus—and would be unlikely to last for more than a year.
If by any chance my right hon. Friend, who has our great respect, and the Government are wrong and such critics are right, what powers are available to the Government to do anything? Can we withdraw from the ERM? Can we realign the currency ourselves; or will we be stuck with a situation in which interest rates go up and down all the time depending on our relationship with the deutschmark?

Mr. Major: With great respect to my hon. Friend, the concerns that he expressed were expressed in a number of countries when they entered the exchange rate mechanism in earlier years, and subsequent events have shown that those concerns were not justified. I reiterate: those countries that have been within the exchange rate mechanism and have kept to the admittedly difficult disciplines of the exchange rate mechanism have had a better inflation record over a period than we have. I wish this country to have that better inflation record—for British industry, British commerce and the British consumer. That is why I believe that it is right for us to enter and why I believe that the move will be successful.

Mr. Robert Sheldon: I accept the need for entry, so that we are not excluded from influencing developments within the Community, but is the Chancellor aware that, of itself, entry at an over-valuation will do nothing for our balance of payments, nothing for manufacturing industry, nothing to


help us to get more skills in our enterprises and nothing for investment? Is he aware that what he has produced is just a panacea—a panacea of hope and nothing else?

Mr. Major: The right hon. Gentleman's question is based entirely on a false premise. I am the last person who needs telling that entry into the ERM is not a panacea, because it was I who coined that phrase a year ago.

Mr. David Howell: Will my right hon. Friend accept that he took the decision that the pound should enter the ERM with considerable skill, and that he deserves warm congratulations on that, even though we shall have a tough struggle to keep the pound where it is? Entry into the ERM ends a long period during which the pound has been kicked around the exchange rate market like a football, and we should be thankful for that.
Does my right hon. Friend recognise that, if the ERM discipline is to work, we shall require much stronger monetary methods and techniques than we have had in the past—techniques of the kind that he and his colleagues were considering back in January? Will he undertake to pursue methods of strengthening our monetary control in this country—including reviewing, and possibly strengthening, the status of our own central monetary authority, the Bank of England?

Mr. Major: I am grateful to my right hon. Friend for his remarks about our entry into the exchange rate mechanism. We are certainly clear in our minds that we need to ensure that monetary policy is a safe and secure discipline, and I shall certainly continue to do whatever I can to ensure that it is.

Mr. Nigel Spearing: Does the Chancellor agree that when he uses the word "discipline" he means "decisions taken elsewhere"? And is it not a fact that a nation entering a fixed or near-rigid exchange rate mechanism with a heavy and persistent balance of trade deficit ceases to be a nation of that characteristic and, in the end, becomes a depressed area of a new economic nation?

Mr. Major: When I use the term "discipline" I mean no devaluation and no constant descent into the easy option. In the 1990s, we cannot afford the easy option and, we are determined not to have it.

Sir Peter Hordern: May I congratulate my right hon. Friend on providing a much-needed extra discipline for the control of inflation, and on putting an end to the widespread perception that wage costs could continue to increase for ever and that we could continue to be bailed out by a declining currency? I also congratulate my right hon. Friend on climbing into the driver's cab of that notorious gravy train, the European Commission, with the prospect of putting an end to Mr. Delors's ambitions.

Mr. Major: I am grateful to my hon. Friend for his comments about our entry into the exchange rate mechanism, and I share the views that he has expressed about it. On economic and monetary union, I share my hon. Friend's concern about the destination for which some in the European Community are heading at present. I believe that our proposals represent the right way to proceed, and we shall argue for them very strongly indeed in the intergovernmental conference.

Mr. Leighton: Is the Chancellor aware that pegging sterling at nearly DM3 to the pound is virtually equivalent to signing the death warrant of British manufacturing industry? Is he aware that it is a crazy, stupid and misguided policy? I prophesy that he has it wrong and that the pound will not stay at DM2·95.
Is the right hon. Gentleman also aware that going into the ERM makes absolutely no sense if we do not want stages 2 and 3 of the Delors plan? I am glad that the Prime Minister is paying attention, because she blusters, huffs and puffs, but in the end always gives way. That is what she has done again.

Mr. Major: I did not notice my right hon. Friend the Prime Minister giving way and accepting the European budget which the Labour party left us in 1979.
With regard to competitiveness, I have a good deal more confidence in British industry than do Opposition Members. I simply do not understand why Opposition Members persistently talk down the capacity of our industry to compete.

Mr. Michael Grylls: Does not my right hon. Friend agree that the tightening of money since mid-1988 has done a good job—no one can ever say again that high interest rates do not work in bearing down on inflation—and that that is why he took his decision on the ERM last week? Does not my right hon. Friend also agree that the Opposition's policy of trying always to suggest an alternative to high interest rates, such as discredited credit controls, proves again that the Opposition are wrong?

Mr. Major: I entirely agree. Our inflationary problem was substantially the result of the dramatic growth of demand. Monetary policy has brought that growth of demand down and will increasingly bring down inflation.

Dr. David Owen: Can we assume that the Government are opposed only to the imposition of a single currency and that they would go along with an optional single currency? Is not such flexibility over monetary union essential if we are to enlarge, as I think we must, to include Czechoslovakia, Hungary and Poland? By insisting on a single currency for everyone, we are effectively ensuring that the European Community will remain only a 12-member Community.

Mr. Major: On the second point, I entirely agree with the right hon. Gentleman. We believe that it is in the longer-term interests of Europe to ensure that the Community of 12 can become a larger Community to admit the increasingly emergent democracies in eastern Europe. We would be wise to do nothing to inhibit their entry at a later stage by decisions taken at an early stage.
An imposed single currency is not only difficult in terms of the concerns of the House of Commons, with which I have full agreement, but also has real econonic dangers for many European nations and we will continue to make those plain. For that reason, we believe that the market-led hard ecu approach is right.

Mr. Ian Taylor: Does my right hon. Friend share my dismay about the fact that the right hon. and learned Member for Monklands, East (Mr. Smith) appeared to judge only one criterion of the level of inflation—the RPI—when a much better guide to the trend is the tightening of monetary aggregates? Will my right hon. Friend take credit for taking sterling into the


exchange rate mechanism at the earliest possible time when it was clear that monetary aggregates would lead to declining inflation?
Will he also repeat and underline the fact that, on a purchasing power parity basis, the DM2·95 central rate will not render British industry uncompetitive and that British industry must now take that rate into account when judging future costs and wage rounds?

Mr. Major: On purchasing power parity, my hon. Friend is entirely right. I quoted some figures earlier which are a clear illustration of that. I am grateful for my hon. Friend's earlier remarks.

Mr. Giles Radice: Despite the potential advantages of joining the ERM, is not the trouble with the Government's decision of 5 October the fact that it was taken at the wrong time, for the wrong reasons and at the wrong rate? In view of all the suspicions and concerns of our Community partners, would it not be good for the Government to say that they intend to be a bona fide member of the exchange rate mechanism and that they intend to take a constructive attitude at the intergovernmental conference in November?

Mr. Major: We will take a constructive line at the intergovernmental conference in November, but a constructive line for the future of Europe does not necessarily mean agreeing to each and every plan that may be promoted by one part of the European Community. A constructive line may well mean standing up for British interests and what we see as the long-term interests of Europe. I give the hon. Gentleman an undertaking that we will do that. We will certainly be bona fide members of the exchange rate mechanism. I made it clear today that, as soon as it is appropriate, we will move to the narrow bands. I do not share the hon. Gentleman's view that it was the wrong time to enter. I believe that it was the right time to enter, and that is why I did so.

Mr. Ian Stewart: Will my right hon. Friend confirm that it was his view that it was appropriate for a first reduction in interest rates to be made which led to his decision to enter the ERM at that time, and not the other way round, as has been generally suggested against his momentous decision? Despite the constraints of the EMS in future, can he assure us that he will do his best not to be pressed into any reductions in interest rates unless and until he judges that they are appropriate in the light of domestic economic and monetary circumstances?

Mr. Major: I certainly confirm the latter point. On the first of the important points that my right hon. Friend made, I think that it was the right time to cut interest rates and to enter the exchange rate mechanism. Indeed, the monetary conditions—first, the fact that narrow money is in its target range; secondly, the fact that broad money growth has fallen every single month since January; and thirdly, the fact that bank lending is now decelerating and the indications that one can see of the flat housing market and other matters in the real economy—were classic signs that interest rates needed to be cut by 1 per cent.
I also felt that it was the right time to enter the mechanism. I also had to bear in mind the fact that, since an interest rate cut was clearly justified, if it had preceded

entry, it might have been seen as an attempt to drive the exchange rate down in advance of entry or, alternatively, a signal that we were not going to enter for some time. Both of those would have caused market turbulence. Fortunately, it was the right time to do both, and we did.

Mr. Harry Ewing: Is the Chancellor aware that it ill becomes Conservative Members who apparently cannot survive on £26,500 a year to lecture the workers of this country about the need to accept low wage increases in the present pay round? May I be the third hon. Member to ask the Chancellor—on two or three occasions, he has mentioned devaluing the currency—to spell out to the House and the country what powers are available to correct his own mistake if he has got it wrong? If he refuses to explain that, we can only assume that he has left himself without any power.

Mr. Major: On the hon. Gentleman's first point, the requirement to spell out clearly the implications of unaffordable pay increases is clear. If people do not know that avoidably large wage increases will cost jobs, they may then negotiate wage increases that would create unemployment, and nobody wishes to do so.
On the second point, I do not accept the hon. Gentleman's premise that we have gone in either at the wrong time or at the wrong rate, and events will bear that out.

Mr. Anthony Nelson: I congratulate my right hon. Friend on the most welcome statement that he has made today. Does he agree that most people in this country, in addition to lower mortgage interest rates, want to be paid and to save in a currency which is strong, stable and valuable? Does my right hon. Friend agree that, having taken the momentous decision to join the exchange rate mechanism, we have taken a most important step towards economic and monetary union from which there can be no turning back?

Mr. Major: I am grateful to my hon. Friend for his kind remarks about our entry into the exchange rate mechanism. The exchange rate mechanism will play a significant part in assisting other aspects of policy to bring down the rate of inflation so that savings will have a secure value. I entirely share my hon. Friend's view on that matter. I do not necessarily draw the same conclusion about future developments towards monetary union.

Mr. Ted Rowlands: If it is such a favourable exchange rate, does the Chancellor now expect a favourable balance of trade, particularly with West Germany?

Mr. Major: As I have pointed out on several occasions during the past few moments, the purchasing power parity rate, which is what matters, is more favourable than many other people have yet considered. If the hon. Gentleman will wait and see, events will give him his answer.

Mr. Quentin Davies: I congratulate the Chancellor on his momentous decision. Does he agree that this is the first time since the Labour devaluation in 1967 that British industry faces the disciplines of a regime of credibly stable exchange rates? It is also absolutely clear from this afternoon's proceedings that the Labour party remains at heart a party of


devaluationists. The vital thing is for both sides of British industry to take on board the full enormous importance of the changed circumstances that they now face.

Mr. Major: It could not be put more clearly, and I entirely agree with my hon. Friend.

Mr. Jim Sillars: Does the Chancellor recall quoting the experiences of other countries entering the ERM? Does he agree that it is a fair parallel to cite the French experience—another weak currency like our own—on entering the ERM? Is it not the case that the French had not only to maintain very high interest rates and introduce credit controls, but to tighten their fiscal policy? Why does the Chancellor think that he can get away with a very loose fiscal policy, when the French had to tighten theirs?

Mr. Major: I think that the hon. Gentleman is overlooking several facts. First, we have a very tight fiscal policy and fiscal surplus, which the French did not; secondly, we have put in place a whole series of supply side improvements, but the French have not; thirdly, they have a socialist Government pursuing socialist policies and we have not.

Mr. Hugh Dykes: Is my right hon. Friend aware that his decision 10 days ago has been almost universally welcomed in this country? It is a significant step forward, as is his reminder yet again today that the eventual single currency will be reached by agreement, not imposition, which is, after all, the Community habit and was at the specific request of Heads of Government when they asked Mr. Delors to draw up the plans.

Mr. Major: I am grateful to my hon. Friend for his support on those matters, which I greatly welcome.

Ms. Clare Short: Is not the truth about the timing and level of our entry to the ERM the short-term interests of the Conservative party? The Chancellor thinks that, via an overvalued exchange rate, he will buy, for a short time, a cut in inflation and the stability to cut interest rates. After the election has been called, we shall see a terrible recession because the exchange rate is overvalued. Surely the danger for the Chancellor is that the markets have read all this, and that therefore the pound will drop in value. He will not get his desired outcome—the cut in interest rates—as the whole strategy will blow up in his face. That will be the price he pays for acting in the interests of the Tory party rather than the British economy.

Mr. Major: The hon. Lady and her party should not judge us by their standards. Entry into the ERM is not about short-term advantages and long-term costs—in reality it is almost precisely the reverse. There will be short-term restrictions on policy in return for the long-term advantage of lower inflation. That is the right way to proceed.

Mr. George Walden: May I congratulate my right hon. Friend on making it clear in his speeches, notably at the party conference, that the success or otherwise of the ERM ultimately depends on self-discipline within the economy? I note his hope, his appeal and his wish for lower wage rates. Will he also make it

clear to the country that there must be no resurgence of the bloated house prices that played such a large part in our inflation in the first place if this policy is to succeed?

Mr. Major: I absolutely share the views that my hon. Friend has expressed. The way in which house prices took off a couple of years ago added significantly to our difficulties—they took off after the election, so they did not help us win—and they represented a considerable complication in policy.
My hon. Friend is entirely right as well in what he says about wage rates, which should apply to management as well as the work force.

Mr. Doug Hoyle: Will not the Chancellor admit that, despite his brave words, British manufacturing industry is not competitive, at almost DM3 to the pound? If it is not competitive, what will the result be? In the early 1980s, the Government destroyed almost 30 per cent. of British manufacturing industry, now the rest of British industry will also go down the plughole because of the Chancellor's folly, dictated not by reliance on economic strategy but by political expediency.

Mr. Major: The hon. Gentleman may feel that, but if he does, he is wrong. In addition, I do not agree with his remarks about competitiveness. I reiterate my point that the size of the trade gap—which I have publicly stated I regret—is essentially the result of excess demand over our capacity to supply at home, no lack of competitiveness. That is why our export performance has been so good.

Mr. Ivan Lawrence: Will my right hon Friend acknowledge that, necessary and commendable as entry into the ERM may be, there is nevertheless widespread concern in the country that it will inevitably lead not only to economic and monetary union but to a form of single currency and centralised banking control, and of control over our economy and taxation policies that will take away this nation's national sovereignty and replace it with the elements of a European super-federal state? Will he make it absolutely clear that under no circumstances will the Government's policies end at that destination?

Mr. Major: I am happy to tell my hon. and learned Friend that I see no prospect of us moving towards a federal state.

Mr. Graham Allen: Does ERM mean exchange rate mechanism of election rigging manoeuvre? Will the Chancellor explain clearly and simply to the House what mechanism exists to devalue the pound within the ERM?

Mr. Major: I will tell the hon. Gentleman precisely what ERM means—it means an assistance towards low inflation. I am not contemplating devaluation, which is the traditional policy of Opposition parties, not a Conservative Government.

Mr. Andrew Rowe: My right hon. Friend is of course aware that the belated conversion of the Labour party's Front Bench spokesmen to welcoming membership of the European Community reflects their hope that by doing so they will belong to a socialist Europe. Does he accept that, although many of us welcome the fact that we are being moved closer to Europe, we wish to see a


Conservative Europe and welcome his latest manoeuvre because it gives us a voice in the central policies of the European Community?

Mr. Major: I am grateful to my hon. Friend. What has become crystal clear during this questioning, to a greater extent than I imagined, is that the Opposition are split on the issue of the exchange rate mechanism. Their Front Bench spokesmen want to go in, but their Back Benchers are already asking how to come out—that is how split they are.

Several Hon. Members: rose—

Mr. Speaker: Order. I have to have regard for the subsequent business, an important debate on financial services and the European market, in which some hon. Members now standing wish to participate. I shall take three more questions from each side and then we must move on.

Ms. Joyce Quin: Is the Chancellor aware that a document that the House will be considering shortly—the Government's official response to the report of the Select Committee on Trade and Industry on the EC and financial services—clearly states that ERM entry will be considered only
when the level of United Kingdom inflation is significantly lower.
In view of that statement, will the Chancellor admit that, for political reasons, the Government have made a complete about-turn?

Mr. Major: That is a very charming attempt, but I will not. The relevant factor is not the historic inflation rate when we were not in the exchange rate mechanism but what the inflation rate will be when we are in the exchange rate mechanism.

Mr. Edward Leigh: Does my right hon. Friend agree that membership of the ERM makes sense to a Government committed to national economic sovereignty only if it is seen not so much as a cosy support system but as a measure of fiscal rectitude equivalent to the old gold standard? In that sense, what hope would there be for any Government who retained membership of the ERM but pursued policies of high spending, borrowing and taxation, and low interest rates, as a Labour Government would? Would not that send the pound not so much floating as crashing through the floorboards?

Mr. Major: That, of course, crisply put by my hon. Friend, is why Opposition Back Benchers hate the idea of the exchange rate mechanism and would never, in practice, have let a Labour Government enter and, in the unlikely event of a Labour Government coming to power, they would seek to bring them out. I hope that the markets and our colleagues in Europe understand that.

Mr. Robert Litherland: The Chancellor puts great emphasis on self-discipline. If

voluntary wage restraint did not come up to his expectations, however, would he ever consider a wage freeze?

Mr. Major: I do not think that the experience of wage freezes in the past 20 years—under Governments of both major parties—has been at all satisfactory, and I do not envisage our taking such action. The reason why I set out so clearly the importance of the wage round is that the sooner that it is clearly understood by both sides of industry that it is necessary for wage increases to be only those that are affordable, the less will be the impact in the form of job losses.

Mr. Graham Riddick: Does my right hon. Friend agree that one of the more distasteful aspects of the whole ERM debate has been the way in which Mr. Jacques Delors has been saying that the inevitable next step is a single currency whether Britain likes it or not? Will my right hon. Friend confirm once again that the inevitable next step is no such thing, and that the present Government will not be dictated to by this Brussels bureaucrat?

Mr. Major: I am happy to reiterate to my hon. Friend that we are not at all in favour of stage 3 of the Delors plan, and that we intend to pursue very fiercely our own plans for a market-led approach.

Mr. Win Griffiths: Everyone knows that the Government have been thinking about joining the exchange rate mechanism for 11 years, and that they have been looking into it particularly deeply during the past five. Given this amazing conjunction of events, and the Chancellor's emphasis on the reduction in inflation, can he tell us the expected rate of inflation on a quarterly basis until October next year, and also what estimate has been made of the rate of unemployment in the same period?

Mr. Major: I shall do that in the Autumn Statement—as is traditional—at some stage in November; the precise date is as yet unclear.

Mr. Anthony Beaumont-Dark: Does my right hon. Friend accept that many of us were disappointed by the rather churlish response of the right hon. and learned Member for Monklands, East (Mr. Smith)—for whom many of us have considerable regard—when my right hon. Friend has done precisely what was asked of him only a week ago, by reducing interest rates and joining the ERM? Is this because the Opposition have recognised—it has been brought home to them—that what we must have are the same kind of wage increases, in relation to productivity, as other European countries; and that, if Rover and Ford car workers ask for 13 per cent. when Benz and Volkswagen workers are asking for 3 per cent., there is no way in which that can prove successful, whoever are in office?

Mr. Major: My hon. Friend is smack on the button: I entirely agree. I confess, however, to feeling some sympathy for the right hon. and learned Member for Monklands, East. It is not easy to try to ride two horses in that circus.

Shootings (Jerusalem)

Mr. Dave Nellist: I seek to move the Adjournment of the House under Standing Order No. 20, to consider an urgent and specific matter which should have immediate attention, namely,
Britain's relations with the Government of Israel following the massacre at the A1-Aqsa mosque".
Last Monday, 8 October, was the bloodiest day so far in Israel's 23-year occupation of Jerusalem, the West Bank and the Gaza Strip. Twenty-one Palestinians were slaughtered and 150 were injured when live ammunition was again used against civilians in the area of the old city which the Jews call the Temple Mount and the Moslems call the Noble Sanctuary; 11 Jewish worshippers were injured by stones in the lower area known as the western wall.
For five days last week, the United Nations laboured mightily—and, in my view, brought forth a mouse. The House should consider urgently whether three assistants from the Secretary General's office, sent as a mission 23 years after Israel's occupation, really constitute a serious response. Certainly, millions will contrast the rapid deployment of a task force to the Gulf following Iraq's invasion of Kuwait with the fact that, 23 years after Israel's invasion of the west bank and the Gaza strip, and after nearly three years of intifada, during which more than 800 Palestinians have been killed, the Secretary General is sending three assistants.
Should you, Mr. Speaker, grant it, the debate could and should illuminate this by considering the words of the former United States Assistant Defence Secretary, Laurence Korb, who said that the Gulf task force was obviously about oil because,
if Kuwait grew carrots, we wouldn't give a damn.
Well, the Palestinians may not grow many carrots, but they certainly grow olives and citrus fruit, and it seems that the world, or at least the bit represented in the Security Council of the United Nations, does not give a damn.
Yesterday, The Observer reported Palestinian doctors who treated survivors as saying that medical evidence showed that the police had fired wildly; and Doctor Mustapha Bargouti of the A1 Makassed hospital, whom I had the honour of meeting in Jerusalem about 18 months ago, spoke of
indiscriminate shooting and in one case we found 14 bullets in one man".
Of 120 people treated at his hospital, 32 were still being treated, including a four-year-old with a rubber bullet in his brain. What security risk was posed by a four-year-old seven days ago in the Noble Sanctuary to result in a rubber bullet in his brain?
I end with a call for a debate. There was no excuse for the slaughter. The middle east needs an end to these slaughters and to the occupation. As a socialist, I think that we need a federal solution that guarantees rights to a homeland for Palestinians and the state of Israel. Israel must come out of the occupied territories and these slaughters must end.

Mr. Speaker: The hon. Member for Coventry, South-East (Mr. Nellist) asks leave to move the Adjournment of the House, under Standing Order No. 20, for the purposes of discussing a specific and important matter that he believes should have urgent consideration, namely,
Britain's relations with the Government of Israel following the massacre at the A1-Aqsa mosque.
I have listened with care to the matter that the hon. Gentleman has raised. As he knows, I have to decide whether to give his application precedence over the business set down for today or tomorrow. I hope that at some stage it will be possible to debate these important matters, but I have to say that the matter that he has raised today does not meet the requirements of the Standing Order and I therefore cannot submit his application to the House.

STATUTORY INSTRUMENTS, &c.

Ordered,

That the draft Hovercraft (Application of Enactments) (Amendment) Order 1990 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Boswell.]

Financial Services and the Single European Market

Motion made, and Question proposed, That this House do now adjourn—[Mr. Boswell.]

[Relevant documents: The fifth report from the Trade and Industry Committee (House of Commons Paper No. 256 of Session 1988/89) on Financial Services and the Single European Market and the Government Reply contained in the Committee's second special report (House of Commons Paper No. 598 of Session 1988/89).

European Community documents Nos. 4454/89 on guarantees issued by credit institutions or insurance undertakings, 6208/90 on "Capital Adequacy of Investment Firms and Credit Institutions", and the unnumbered explanatory memorandum submitted by the Department of Trade and Industry on 13 July on investment services.]

The Secretary of State for Trade and Industry (Mr. Peter Lilley): I welcome this opportunity to debate the development of the single financial area in Europe. Before I begin, I wish to apologise to the hon. Members for Gateshead, East (Ms. Quin) and for Redcar (Ms. Mowlam) if there has been a failure of communication on my part, although it has the happy result, from my point of view, that I have the opportunity to debate with them. I suspect that we shall find that, although we may have occasional disagreements over measures, we shall have a large measure of agreement on our final objectives.
I begin by paying tribute to the work of the Select Committee on Trade and Industry, whose excellent report forms the prelude to this debate. The Government agree with the bulk of the Committee's findings, as we made clear in our response. Like the Committee, we believe that the creation of a single European financial area should open up opportunities for one of Britain's most important industries. Indeed, the British Government have been the foremost exponent and supporter of the single market programme as a whole and of the single financial area in particular.
The single market is a natural extension of the policies of competition, deregulation and free markets which we have implemented domestically, and the single market programme was largely the brainchild of the British Commissioner Lord Cockfield. The unique and original feature of the single market programme was the idea of mutual recognition. Essentially, once a business or process has been authorised and is supervised in one country, all other member states agree to recognise that the business is duly regulated. It will therefore be allowed to do business or to set up branches in their states without undergoing further authorisation. This paradigm is particularly applicable in the financial services industry, as we shall see.
Implementing the single market in financial services is of special importance to the United Kingdom. Financial services are an area in which the United Kingdom has a relative advantage; that is clear from the Cecchini report, which shows that in many aspects of financial services United Kingdom industries' costs are lowest and their financial products are the most competitive.
The importance of the financial services industry to the United Kingdom's economy is shown by the number of people that it employs—some 2·7 million as against 1·6 million only 10 years ago. I refer advisedly to the United

Kingdom financial services and not just those of the City of London, because the United Kingdom also contains Scotland, which is our second most important financial centre. The financial services industry is already the largest industry in Scotland, having increased employment by 40 per cent. since 1979. Its contribution to Scottish GDP has grown at the rate of 6·3 per cent. per annum compound. The City of London is one of Britain's most important economic assets. It has the world's largest foreign exchange market, more cross-border equity transactions are carried out in London than in any other world market centre, and the Lloyd's insurance market is unique.

Mr. D. N. Campbell-Savours: It is now generally recognised throughout the City that the exchange rate mechanism statement and the base rate cut were leaked. Evidence of that is to be found in the FTSE 100 index, which went up 16 points, from 2,035 to 2,051, in the 90 minutes before the Chancellor's statement. We are told that the City is properly regulated. Will there be a leak inquiry and will the Minister ask the stock exchange surveillance department for a report on what happened during those one and a half hours so that there can be the fullest possible inquiry? May we have an assurance that this matter will not be brushed under the carpet, because many dealers and speculators in the market made millions of pounds in that 90 minutes as a result of having price-sensitive information.

Mr. Lilley: The hon. Gentleman has an unattractive habit of assuming that any allegation is automatically true. Allegations are examined by the authorities that we have established. I shall deal with that later.
All these businesses in the United Kingdom produce a total net income for the balance of payments of more than £6·5 billion per annum and the Government continue to create the conditions for further success. Taxes on business and on individuals have been brought down to more internationally competitive levels and the Chancellor's forthcoming abolition of stamp duty and the change of basis for the taxation of futures and options represent two further breakthroughs for our financial markets.
The strength of the British industry has been accumulated over generations, but it has been based particularly on two factors—its relative openness to competition and the rest of the world and its relatively high standards of integrity and reliability for which the London market is renowned. The Government have been particularly keen to reinforce both strengths. Hence, on the competitive side, the abolition of exchange controls and the removal of restrictive practices prior to big bang. Both these changes intensified domestic competition, encouraged more international players to base themselves in Britain, and consolidated London as the great world financial centre in this time zone.
Raising the standards of probity in financial markets and seeing that these higher standards were properly enforced has been a Government priority since our inception. In 1980, we brought in the first legislation against insider dealing. In 1981 we appointed Professor Gower to review the whole body of law on financial services and investor protection. His report led to the Financial Services Act 1986.
In 1988 we set up the Serious Fraud Office, with its special powers under the Criminal Justice Act 1987, and


we reorganised my Department's investigatory and prosecution functions by creating a new investigations division.
The Companies Act 1989 improved international co-operation with the establishment of memoranda of understanding with the USA and Japan in the securities area and the provision of new powers to assist overseas regulators. This is a real record of achievement and contrasts with that of the previous Government, who made no improvements whatever to the regulatory environment. We have strengthened the framework to tackle abuse and dishonesty in the City and other financial markets. The fact that a number of offences and alleged offences have been brought to light in recent years is not evidence that City standards have declined; it is proof that higher standards are being more vigorously enforced. Moreover, some of the more disturbing events took place under the old regime, and would have been more easily detected and therefore deterred under present arrangements.
In creating the main part of the regulatory framework—the Financial Services Act—it was important to strike a balance between the needs to ensure effective investor protection and to avoid a system so onerous and rigid that it would damage businesses and stifle innovation. With the later fine tuning introduced in the Companies Act 1989, we are getting the balance right.
Our system is based firmly in statute, but it also incorporates a significant degree of practitioner involvement. This gives flexibility and the scope for regulation to be sensitive to market needs. It is no accident that much of the regulatory reform at present going on in other EC member states is based on a similar approach. Having put the structure in place, we now look to the regulators and practitioners to make it work. They must do that in as cost-effective and flexible a way as possible, consistent with providing real protection to investors.
Our first priority has been to ensure that our own domestic arrangements are soundly based, but in negotiating the directives that open up the single financial area—the SFA—we have had similar objectives. The keystone to creating an SFA in Europe was the capital liberalisation directive. It came into force on 1 July 1990, by which time exchange controls were abolished in all the main EC countries.
An invaluable aspect of the capital liberalisation directive is that it requires member states to abolish restrictions on foreign exchange transactions not just between member states but erga omnes—that is, with the world as a whole.

Mr. Barry Porter: Very good.

Mr. Lilley: I had to look it up.
Following that, the second banking directive was adopted in December 1989. It will take effect on 1 January 1993. It incorporates the mutual recognition principle, and we hope that it will be the paradigm for all directives in this sector.
Essentially, banks and building societies will be given a passport to sell their services across borders and to establish branches, authorised and supervised by the monetary authorities in their home state.

Mr. Anthony Nelson: Everyone recognises the importance and the fast progress that has been made in negotiating and agreeing these directives. Does my right

hon. Friend agree that, important as the directives are, it is equally important that they be observed in the same way in each country? It is one thing to have a single passport or a level playing field, but it is quite another to translate that into the same degree of observance in each member state. Although there is commonality in the trade in agricultural products, other countries frequently flout the rules.

Mr. Robin Maxwell-Hyslop: Lamb in France.

Mr. Nelson: Lamb in France is an example. What guarantees or sureties are there that not only will the directives be enforced but that they will be interpreted in the same way in each country?

Mr. Lilley: My hon. Friend makes a good point. The United Kingdom is always in the forefront in implementing directives once they have been agreed, even though we may have difficulties with them when they are being negotiated. We are also in the forefront in enforcing them properly, objectively and effectively. We expect to see similar practices followed by our partners in the Community and, of course, they are subject to the European Court of Justice if they fail to do so.
As I have said, the second banking directive will give banks a passport to offer investment services as well as normal banking services, but specialist investment service companies that are not part of banking groups are not covered by that directive.
The investment services directive is intended to entitle them, too, to a single passport. On the continent, most investment advisers are parts of large banking groups and only the United Kingdom has a sizeable number of specialist investment firms outside banking. Hence this directive is particularly important to the United Kingdom.
One of our key objectives has been to ensure that the second banking directive and the investment services directives come into force simultaneously. Any delay in the investment services directive would put our independent investment services firms at a disadvantage to competitors that are part of big banking groups. Happily, negotiations on this directive are proceeding apace, and the United Kingdom welcomes the goal of the Italian presidency to reach a common position among member states by the end of this year.
However, the House will understand that agreeing this directive is a negotiating process and we still have some very important work to do to achieve the right provisions. Some of these provisions, such as those affecting the position of the professions and independent financial advisers, depend on the outcome of the capital adequacy directive. I should like to see them given a passport under the investment services directive.
The position of appointed representatives is another area where we have not yet reached agreement. Under United Kingdom law, appointed representatives of investment firms do not need to be separately authorised. The directive, as currently drafted, would require them to be authorised and I know that this is causing the industry some concern. However, I hope that we shall be able to resolve that point satisfactorily.
The concomitant of the second banking directive and the investment services directive is the capital adequacy directive, which ensures that all financial services supervisors enforce certain minimum standards of capital


adequacy to prevent regulatory arbitrage. However, it is important that the final capital adequacy directive should relate capital requirements for each type of business to the risks that firms actually accept. That means not overburdening existing firms or closing the market to new firms. Equally, I do not want such a level of reserves that business is lost from the whole Community.
The third measure—the proposed regulation on guarantees—is also a market-opening measure, but it is not yet one that we can support. It would oblige public bodies to accept guarantees offered by any credit institution or insurance company authorised in the European Community. The Government appreciate the intention behind the draft regulation—which I understand to be to prohibit discrimination on the ground of nationality—but we believe that it is unnecessary, because discrimination on the ground of nationality is already prohibited by the treaty of Rome.
As drafted, the regulation is seriously flawed and unworkable. It would require a public body to accept any guarantee offered, irrespective of the financial standing of the institution offering the guarantee. It would have to be accepted, regardless of whether the guarantee was unreasonably large in relation to the size of the institution offering it; regardless of its terms; and regardless of the merits of competing prospective offers, which would have to be ignored. Those concerns have been put to the Commission, which, we believe, recognises some force in them. It is reconsidering the terms of the regulation and we await further proposals.
The Select Committee expressed particular concern about the lack of progress in the liberalisation of insurance. While some progress has been made, the Government fully share the Committee's concern. There has been freedom since the 1970s for establishments to set up branches and subsidiaries in the Community, but that freedom has been subject to regulation by the host state. Some host states have used that supervisory role to control tariffs and the terms of the policies that may be sold. The result has been to protect home markets from price competition and from the innovation in which the United Kingdom industry excels.
The Cecchini report noted a wide disparity of prices for insurance throughout the Community which could not be explained by differing risks. Freedom of services is especially important for the British insurance industry. Last year, the insurance sector contributed almost £3 billion in invisible earnings—about half of the total of all financial institutions. It employs 340,000 people in the United Kingdom, a quarter of them in Scotland and the north of England.
The second non-life insurance directive, which came into force this year, provided genuine liberalisation of the market for large commercial and industrial risks, but outside that area the picture is not bright, at least in the short term. We are far from a position in which every European consumer has a free choice in purchasing any insurance policy that he wants from an authorised insurance company. That denial of freedom of choice is said to be justified on consumer protection grounds, but sometimes it appears to be more like producer protection.
However, at the end of last year, Sir Leon Brittan announced that the Commission intended to adopt for the

insurance market the principle of the single licence, or single European passport, which has already been introduced for other financial service sectors. That approach is embodied in the Commission's proposal for the non-life insurance framework directive. It was formally presented to the Council by Sir Leon Brittan on 17 September, and it will shortly be undergoing the usual scrutiny procedures of the House.
The single licence will enable insurers to provide all types of non-life insurance throughout the EC. They will be able to establish local branches in other member states and transact business across frontiers, subject to the authorisation of and prudential supervision by the authorities of their home state alone. Control of British insurers' prices, tariffs and policies by other member states will end and there will be genuine freedom of choice. That is good news for European consumers and also for British industry.

Mr. Stan Crowther: Does the Secretary of State agree that that happy state of affairs will not happen by 1993?

Mr. Lilley: I agree that it is unlikely to be implemented by then, but I hope that agreement can be reached on the directives.

Mr. Spencer Batiste: My right hon. Friend rightly stressed the importance of all the directives to the financial services industry, but even more important is the impact on the wider Community—the investors and the businesses that want to take advantage of the single market. One of the great problems in Britain is the considerable delay in clearing payments between one country and another. I understand that a discussion paper published by the Commission, that was recently given to my right hon. Friend, dealt with possible methods of speeding up payments. That would be of great benefit to small businesses and investors in this country. What is my right hon. Friend's attitude to that discussion paper?

Mr. Lilley: My hon. Friend has made a good point about an important aspect of business across frontiers. We shall consider the discussion paper, but it would be wrong to give an off-the-cuff response.
British industry has welcomed our approach to liberalisation, and it is for it to take advantage of the new opportunities in prospect. The Commission is due to bring forward, by the end of the year, a parallel proposal for the life assurance framework directive. That will extend the single licence principle to the life assurance sector. We welcome the Commission's declared intention to give the highest priority to achieving its early adoption. It is essential that insurance is treated on a par with other financial services.

Mr. Maxwell-Hyslop: Is my right hon. Friend seized of the point that time is of the essence in reciprocity? While German banks can sell German life insurance in Britain, but British life insurance companies cannot sell their policies in France, there is unequal competition.
On the question of fraud, will my right hon. Friend comment on the recommendation in paragraph 82 that actions for damages should be justiciable in the country in which the person who suffers lives? People with modest means have access to legal aid for an action in this country, but they cannot sue a Greek insurance company in Greece with British legal aid.

Mr. Lilley: I agree that it is important that we reach agreement as soon as possible. The Commission is now seeking to do that, and we are giving every support. Of course, for as long as we fail to have the directive in place, the position described by my hon. Friend will pertain. In general, British insurance companies have the edge over foreign competitors, so it is they who want access to foreign markets, rather than the reverse. I think that I accept my hon. Friend's point on justiciability, but I want to consider it further. My hon. Friend the Under-Secretary may give him an answer when he replies to the debate.

Mr. Tam Dalyell: The Secretary of State said that British insurance firms have the edge, and I do not doubt that that is true. Is not that also precisely why—quite frankly, this is anecdotal—a number of Scottish firms are worried about doing business in Europe? They believe that barriers are being put up by people who know that we have the edge. That is especially true with medical insurance. Has the right hon. Gentleman received any representations from medical insurers?

Mr. Lilley: I have. I have visited Scotland twice in the past fortnight and that point was made on each occasion. The Scottish institutions are at the forefront of the industry, and if they have any specific evidence of obstacles being put in their way, I hope that they will bring it to the Government's attention. We will use it as further evidence of the need for progress.

Sir Anthony Grant: Is my right hon. Friend aware that the Germans are saying that they do not understand the concept of insurance broking, and therefore would have to pass special legislation before Germany could achieve the same standards as Britain? Does he agree that that is largely an excuse for delay? Will he do everything possible to ensure that the Germans do not use that bogus reason for delaying progress?

Mr. Lilley: It is true that insurance broking is not as developed in Germany as it is in this country, which is one reason why our insurance industry could benefit from the liberalisation of the Germany market. I agree that there should not be any artificial restrictions, and the absence of legislation should not be taken as an absence of permission to trade under Common Market rules. We would be hostile to any such legal interpretation.
For the Government, an important aspect of the debate will be the contributions from many hon. Members who have expertise and interest in this subject.
Progress with the single financial area is moving in the right direction, and we have avoided the dangers and pitfalls that might have presented themselves. We avoided also the over-rigorous harmonisation of sectors, which could have meant that idiosyncratic institutions and those perculiar to the United Kingdom—such as discount houses, gilt-edged market makers, and so on—would have suffered. We obtained proper permission to allow them to continue operating.
We also avoided the Fortress Europe approach and placing too much emphasis on reciprocity provisions with others outside Europe. We have ensured that the main emphasis is on mutual recognition of supervision by different member states, so that we are in the business of deregulating and of freeing up the market rather than otherwise.
The greatest changes will be those that result from the psychological changes that the directives bring about. I mean by that a greater willingness by producers and consumers alike to think beyond their own national borders. It is very much up to our industry to take advantage now of the opportunities that have already been opened up, to prepare for those that have yet to present themselves, and to respond to the change in the psychological climate. It will be immensely to the advantage of the industry and to this country if that is done.

5 pm

Ms. Marjorie Mowlam: I welcome the new Secretary of State of Trade and Industry and congratulate him on his appointment. This week, we read in our newspapers that only 2 per cent. of the public knew who he was.

Mr. Lilley: That is a higher proportion than the percentage of the general public with whom I am familiar.

Ms. Mowlam: I am sure that that is so, but that is the Secretary of State's problem, not the public's. The right hon. Gentleman is the Secretary of State for Trade and Industry, and the public are not.
If only 2 per cent. of the public know anything about the Secretary of State, one must hope that he will double that figure by the time of the next general election. If so, he will be progressing as fast as inflation under the present Government.
The Secretary of State's speech was marked by a great deal of complacency. He said that regulation is in place and working, but has he forgotten Barlow Clowes, House of Fraser, Dunsdale Securities, Blue Arrow, Polly Peck, Guinness, and British and Commonwealth?
The right hon. Gentleman said also that he hoped that a "psychological change" would flow from the directives, and that the City would wake up to that change. However, as the many questions from all parts of the House show, the insurance industry does not need a psychological change. It is worried about the built-in structural differences that pose difficulties to British insurance companies. It does not need a psychological change, and for the right hon. Gentleman to suggest that one should be the main focus of the directives is very worrying.

Mr. Quentin Davies: Does the hon. Lady appreciate that the Barlow Clowes scandal and the others to which she referred occurred under the previous regulatory regime, before the existing financial services structure was put in place and before the single market regime came into effect?

Ms. Mowlam: I am sure that the hon. Gentleman acknowledges that the same degree of complacency was evident before the new legislation's implementation in 1986. There is no substance to the point that he makes. The Blue Arrow case is to go before the courts this week, and in that instance the compliance officers were operating as a consequence of the Financial Services Act 1986. Other cases that have arisen since then include British and Commonwealth and Polly Peck. I accept that the Guinness and Barlow Clowes scandals, together with others, were perpetrated before that legislation, but of the six or seven instances that I cited, the majority have occurred since the Act was implemented.

Mr. Campbell-Savours: Perhaps I may add to my hon. Friend's list the case that I raised before. I refer to the leaking of price-sensitive information relating to the cut in the base rate a week last Friday. It is known by City dealers that a firm named Barclays de Zoete Wedd and another named Salomon Brothers were both active in the market in the one and a half hours before the Chancellor's statement. People are asking questions about those companies' actions, and if only to clear their reputation, if that is possible, the Government should order an inquiry into how that price-sensitive information got into the hands of people in the City.
Is it true that a senior Minister had dinner the evening before with a director of a major City bank, when the imminent cut in the interest rate was discussed? I only want to know the truth. Did that happen, or did it not?

Mr. Ian Bruce: Answer.

Ms. Mowlam: I thank my hon. Friend for raising that point.

Mr. Bruce: Answer.

Ms. Mowlam: I will answer, if the hon. Gentleman will permit me. I am sure that the Secretary of State listened carefully to my hon. Friend's remarks, and I hope that he will fully cover them when he winds up the debate.
As the House knows, we welcome the move towards a single market. At the same time, we accept the widely held view that the pace of change will be slow as a result of the many aspects that the Secretary of State mentioned, including derogation, different regulatory systems, and cultural and linguistic barriers.

Mr. Batiste: The hon. Lady welcomes the creation of a single market, but does she accept that the introduction of credit restrictions in the United Kingdom would severely weaken our banks and financial institutions at the very time that they need to perform at their best? Will she completely dissociate the Labour party from the introduction of any system of credit control?

Ms. Mowlam: I am sure that the hon. Gentleman is aware that the proposals contained in our three-pronged approach to the country's economic problems are no different in respect of credit controls from those of the French and Germans, so clearly that will not be a problem in the single market.
It would be helpful if the Government would take into account and recognise the contribution by the City and the financial services sector to the British economy, and that it is in the interests of all British people that Government policies—including those of the next Labour Government—help to maintain the financial services industry's quality and vitality.
Contrary to the assertions by the Secretary of State last week, the Labour party is happy to be an ally of the City, provided that the City is happy to be an ally of the British people. The aims and values that the Labour party conference openly embraced state that we welcome the open market wherever its free operation achieves the end of providing real choice for the consumer. The difference between our attitude and that often displayed by the Government is that they and the Tory party have become hypnotised by their own obsessions with the single market and have forgotten its ultimate purpose. The open market

has become for the Government an end in itself. For us, it is the means to an end. Only at the point at which the single market fails to deliver that end will we intervene.
That view does not detract from our concerns about the failure of long-term investment in British industry—but no doubt a debate on the implications of taking the short-term approach will take place on another occasion. From the principle that I have stated flow our two main objectives—to ensure a positive enabling approach to UK financial services in Europe, and to maintain a firm commitment to investor protection for consumers of financial services in the UK.
From the negotiations leading to the big bang, to the introduction of the Financial Services Act 1986, one Minister after another has tried to convince the industry that the Government have been doing a good job. As has already been pointed out, the new Secretary of State for Trade and Industry is the ninth in as many years. I am sure that the new Secretary of State believes, like his predecessors, that he can do an even better job and that only a few changes are required to correct the minor errors that remain.
The reality is very different. Over the past year, I have spent a considerable amount of time listening to people in the financial community voicing their growing resentment of the failure of strategies executed or supported by the Department of Trade and Industry over the past 10 years. Examples include the selection of the wrong market maker system in SEAQ to the virtually complete re-writing of the FSA rules and structure, where the Government blundered along without direction.
The same is true of the Government's dealings in respect of Europe. Despite their recent trumpeting about co-ordinating international bodies, which the right hon. Gentleman repeated today, successive Ministers failed to rationalise the dissemination of information in the real business of enforcement. Ministers have gone to the United States and to Japan, and have returned only with agreements that had already been reached between the regulatory bodies of those countries and of this country.
How can the City have faith in a Government who pay minimal attention in the directive on undertakings for collective investment in transferable securities to the problems confronting our unit trust industry, which the Secretary of State failed to mention, because of the unfair advantage enjoyed by our competitors who have, as the Germans do, tied distribution channels, so making access for our industry more difficult and problematic?
Secondly, as the Minister mentioned, there are the difficulties in the insurance industry, which faces structural problems. Banks in Germany and France make it difficult for competitors to get into the market, as they are an addition, and it worries them greatly. Then there are the problems of greater vulnerability to takeovers in the industry when faced with French and German conglomerates.
Thirdly, there is the question of the future for our intermediaries when they are faced with the high capital adequacy levels demanded in the capital adequacy directive that the Minister referred to. Labour wants the London market to remain the lead financial centre in Europe. It is quite clearly a national asset of considerable value.

Mr. Jeremy Hanley: Will the hon. Lady give way?

Ms. Mowlam: Yes, but it is the last time.

Mr. Hanley: I am grateful, and I declare any interest which might be published in The Observer colour magazine.
Will the hon. Lady make it absolutely clear whether her party's major policy is that of direct intervention by the state, or whether she will still uphold the Government's policy, which is basically self-regulation under supervision from the state?

Ms. Mowlam: I have answered that in principle, and I shall answer it in detail in a minute.
The London market is of essential importance to this country and we want it to continue. The difficulty—this was evident from the Secretary of State's remarks on the insurance industry—and what the Secretary of State does not seem to realise, is that, when other representatives in the EC talk about level playing fields, they send 12 players to the negotiations. The Government send our team without even a goalie. That is the sort of problem we face in negotiations in Europe. If the Government do not do what the French Government are doing for Paris and what the Germans are doing for Frankfurt, however hard the City competes for business in the single market its prospects will be scuppered.
Our greatest concern must be the Government's cavalier attitude towards consumers' interests. The Government were primarily motivated to promote wider share ownership as a cheap way of trying to popularise privatisations. Having created those investors for their own convenience, the Government must now have a responsibility for their interests.
What have the Government done to avoid the situation in which the number of brokers prepared to deal with private clients has plummeted? There has been no mention of that today. The minimum size of deals now accepted by some brokers is as high as £50,000 or £100,000.
If the investment services directive, to which the Secretary of State referred, is accepted as it now stands, investors who put their money into other European firms may not be entitled to the same sort of protection for their money as investors in British firms. In the years ahead, we could well be hearing of another Barlow Clowes, and even if it was a Barlow Clowes with a French, Spanish or Italian accent, the outcome for British investors will be exactly the same.
The major area where the Government have failed to protect the British people in the open market—it is amazing that the Minister got through his speech without even mentioning it in passing—is by ignoring the need for a consumers directive to be implemented at the same time as other directives in 1993. When I mention the interests of the British people, I mean the British people, not some small group of people dealing in an obscure market. I mean the 41 million people who have building society or bank accounts, the 24 million people with car insurance and the 18 million with life assurance. They need to know what rights and protections they have if they purchase services from other European countries. At present, the Government will fail to tell them.
Let us turn briefly to what the City is saying. Today, the Minister described why he thinks that the Government should be proud of their record on regulation and investor protection. The Government have introduced a cycle of regulation followed by deregulation. Let us look back to

the curtailment of powers of business investors to take civil actions when firms breach self-regulatory organisations' rules, which was once described—the Secretary of State grins—as the cornerstone of the Financial Services Act 1986. That is one of the many U-turns which the Government have implemented and the industry has had to survive.
There is no doubt that a quality product, produced in this country, needs defending and that its standards need to be maintained. If self-regulation cannot enhance and maintain that quality, the Government should act as quality controller.
The structure of regulation of financial services in this country requires amendment. It seems that everyone except the Government agrees with that. On this side of the House, we are not interested in change for change's sake. Quite clearly, the present structure is young and needs a period of stability to bed down, but several major weaknesses have been exposed in the existing system which need changing, both in the duplication of regulatory agencies and in the detection of fraud. What the Government and the Secretary of State have failed to acknowledge today is that, unless these problems are dealt with, the integrity of the present regulatory regime will be undermined.
We are not arguing for more regulation: we want more effective and precise regulation. If one talks and listens to people in the City, one realises that that is the problem that they and the investors are facing.

Sir Robert McCrindle: rose—

Ms. Mowlam: I am sorry, but I have given way too often, and many hon. Members wish to speak.
Consumers are heavily dependent on other people's skill and integrity when buying a financial service. Therefore, it is as well, in some senses, that the Government are not offering financial services. Investors are bombarded by cross-selling between banks and building societies, and are exposed to the highly dubious practice of cold calling. We need to know what has happened to the attempt to agree even minimal harmonisation of regulatory rules across host nations so that consumer protection is maintained.
In its place, we have conduct of business rules, which, as the Secretary of State mentioned earlier, are designed to protect the consumer. The Secretary of State failed to tell the House that these rules can be challenged by non-British firms in the courts on the basis of whether or not they serve the "general good". If that happens and the case is taken to court, it could take a number of years. The person who suffers in the interim is the British investor. In the meantime, EC firms will come here and our firms will suffer for lack of a competitive advantage.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood): Could the hon. Lady clarify for us which regulatory bodies the Opposition would abolish, and which ones they would set up and strengthen?

Ms. Mowlam: I was not referring specifically to financial bodies. I made two points very clearly. First, under the present system of regulation, there are a number of regulatory bodies, and they need streamlining—talk to anyone in the City and they will confirm that. As the Minister well knows, the Association of Futures Brokers


and Dealers and the Securities Association are in negotiations, and other negotiations have been considered and will be considered, so streamlining is already under way.
Secondly, I referred to the regulation of serious fraud. About a dozen bodies deal with that. The Select Committee—not the report that we are discussing today, so this is not really relevant, but I shall answer the Minister's question—stated quite clearly that, in company investigations, a centralised computer-based system was needed. The Minister is so concerned about what we shall do with those regulatory bodies, but it will be equally interesting if he can answer whether that centralised database will be provided. The regulatory bodies need that degree of communication.
It would also help, if the right hon. Gentleman is interested in answering, if he told us how he advises Japanese and United States regulatory bodies when they come to this country. I have been to the States and talked to such bodies. With the present Government's regulatory structure, it is impossible for such bodies to know whether they should talk to the Serious Fraud Office, the Department of Trade and Industry, TSA or the Securities and Investments Board. Clearly, under our present system, that is a problem which we would address. It will be interesting to see if the Minister has any suggestions to make about what he would do.

Sir Robert McCrindle: rose—

Ms. Mowlam: I am sorry, but I gave way to the Minister as a matter of courtesy and I shall not give way any more.
The point that I was making about business rules, which is central to consumers in this country, is that we have a set of rules that can be taken to the courts and as a result the protection that we consider essential for our consumers could be rejected on the grounds of general good. That is not just my worry. The British Bankers Association, which made a submission for this debate, is particularly worried about that point, not just for consumers, but for the competitive disadvantage to British industry.
The Minister knows, but failed to tell the House today, that in reality, without a consumers' directive but with the list of directives that he gave us, we shall get a harmonising down in consumer protection to the lowest common denominator of the European countries. When the Labour party comes to power, it will fight hard for a consumers directive. In the interim, the least that the Government can do is ensure that clients' assets are not available to the liquidator in the event of an investment firm becoming insolvent. Clearly that is not a problem here, but because of some structural conditions in other countries, it will present difficulties in harmonisation.
The Government should further ensure that all EC firms must disclose the nature of their compensation scheme by telling investors at the point of sale exactly what scheme applies, so what compensation they are entitled to. The minimum that the Government should achieve is that compensation schemes throughout Europe meet strict criteria, such as the index-linking of any limits on compensation and cheap, easy access to such claims.
The problems of cross-frontier dealing create considerable difficulties for British consumers. In 1987, there was a

case before the European Court of a British person living in Spain dealing with a Swiss insurance company about a problem with his car in Italy. It was not clear under which country's law that particular consumer should make his complaint. Such a problem is a legal nightmare for the individual. It is enough to make any British consumer break out in a cold sweat. They now face the prospect of recurrent cosmopolitan nightmares under the present regulations without that directive.
Consumers will not be alone in suffering from sleepless nights if the future of London as the lead financial centre is called into question. The House is well aware of the City's present clear advantages: in-depth experience, a range of specialist markets and greater liquidity than elsewhere. They need to be supplemented with Government assistance and encouragement not only to improve infrastructure and to supply trained and qualified staff, but to integrate technological infrastructures and to extend communications, such as the countrywide broad-band network.
Without those changes, the City will struggle to keep its competitive edge. The Labour party is pledged to give that support. The disengagement of Department of Trade and Industry Ministers is pervasive, yet the task is so central that it is left to the chair of TSA, Stanislov Yassukovich, to suggest that City of London corporation should set up a research unit to fund the problems of infrastructure in the City of London. If the Department of enterprise illustrated half the enterprise that it expects of others and dealt with that problem, the City would not face its present difficulties.
The Government in their response not just to Europe but to the City may go down in history as so complacent—perfectly illustrated by the Secretary of State's speech today—that the map of the square mile must undergo a humiliating boundary review as we reach the next century.

Mr. Kenneth Warren: I congratulate my right hon. Friend the Secretary of State on his first speech in his new post from the Dispatch Box. Whatever the stupidity of the 2 per cent., he is admired by 100 per cent. of Conservative Members, who believe that he is the man for the job.
I declare a formal interest in the debate. I doubt whether any hon. Member with outside interests is not affected by the developments as we move increasingly fast towards 1992. I hope that the business managers on both sides will note my regret that Back-Bench Members are to be given only 70 or 80 minutes to debate this important subject. The benefit of that to those present is that my speech will be severely truncated. It is important that more time should be given to these important issues.
I am not so much concerned that it has taken 16 months for this matter to come to the Floor of the House. When a Select Committee report is published, it is good to give the House and those outside who are interested in it time to review what is going on. It may be uncharacteristic for a Select Committee member to do so, but I thank the Department of Trade and Industry for the efficiency with which it has made available in time for this debate several papers which we requested. We trust that that is a foretaste of how it will assist us in future. Today's papers state that the Confederation of British Industry will investigate the


DTI. After that, the light cavalry of the Select Committee may investigate the CBI. We are grateful to the DTI for its response.
In my short speech today I shall touch on three items: the Export Credits Guarantee Department, which is causing considerable concern inside and outside the European Community, in terms of our competitiveness compared with other Government-sponsored organisations within the EC; the regulatory organisations which were touched on by the hon. Member for Redcar (Ms. Mowlam); and banking. I shall leave insurance to my elders and betters.
The report and this debate seek fair and equal access for firms to EC and worldwide markets.

Mr. Maxwell-Hyslop: At the same time.

Mr. Warren: My hon. Friend is always at my right hand with the apposite words.
I hope that my right hon. Friend the Secretary of State will recognise that, in all discussions and negotiations in the EC, we must not merely focus on what Brussels says. British companies must operate across the world. The threat from Tokyo and New York to the acknowledged supremacy of London is constant and growing. My right hon. Friend and his colleagues are well aware that, within the EC, Frankfurt is breathing increasingly hotly down our neck, with Paris and Amsterdam not far behind keeping the pressure on us.
We must see ourselves not just within the EC. We must recognise that disparities in competition must be measured on a worldwide scale. We may understand that, but I am not sure whether Mr. Delors and his merry troop see further than the gates of Brussels. I hope that the Government will bring it to their attention that we seek to operate within the world market, as should the whole EC.
One of the benefits of giving a report time to settle is that various authorities have a chance of telling us how they see the developments to which we have drawn attention. There is absolutely no question but that the lack of a proper working regime for the ECGD worries British exporters more than anything else. There is unquestionable evidence that the ECGD premiums are higher than those charged to our competitors by their national credit insurers. The Select Committee and those in industry are worried that the portfolio management system as it is proposed will not enable us to remain competitive with other nation states.
The Government—even a non-interventionist Government—must recognise that they are in partnership with all those who seek to export. They cannot escape that liability. Unless they campaign within the EC for reductions by organisations, such as Hermes and COFACE, in their methods of operation in parallel with our own, in seeking to provide more private enterprise, we shall destroy it.
Hon. Members have referred to regulatory bodies. When my hon. Friend the Under-Secretary of State for Corporate Affairs intervened to ask the hon. Lady which bodies she would like to get rid of, I wondered whether I could stand up and say anything about that. I have a shopping list and I shall run quickly through it.
There are six financial service regulators, nine professional bodies, seven recognised investment exchanges, two clearing houses, the Bank of England and a partridge in a pear tree. We have 24 separate regulatory

bodies. When my hon. Friend the Minister replies to the debate it would be worth looking at that and seeing whether, after some years of working, the Banking Act 1987 and the Financial Services Act 1986 can be improved. The Government must maintain a competitive stance in parallel with the efforts of our exporters of visible and invisible goods.
The Securities and Investments Board is doing quite a good job but if we look at some of the other organisations it is extraordinary to find the number of staff they have in relation to the number of firms they serve. I shall throw a few acronyms around and hope that hon. Members will be able to translate them immediately in order to save time. The AFBD—Association of Futures Brokers and Dealers—has one member of staff for eight member firms. However, FIMBRA—the Financial Intermediaries, Managers and Brokers Regulatory Organisation—has one member of staff for 400 member firms. LAUTRO— the Life Assurance and Unit Trust Regulatory Organisation—has one member of staff for 10 member firms. IMRO—the Investment Management Regulatory Organisation—has one member of staff for 130 member firms and TSA—the Securities Association—has one member of staff for five member firms. There is something wrong that so many regulatory bodies are needed. Something should be done to try to sift them down, because for the financial service regulators alone, there are 800 staff costing 46 million.
On rare occasions, Select Committee members are invited to sumptuous dinners in the City. We are not regarded as highly as my right hon. Friend the Secretary of State and his colleagues, but on those occasions we are told that one of the penalties of the Financial Services Act which is now becoming apparent is that it is costing more to compete and that therefore we are not achieving the sort of service that my right hon. Friend and his colleagues intended in order to make the country and the City more competitive.

Mr. Nelson: This is an important point, about which some of us have written to my hon. Friend in his capacity as Chairman of the Select Committee, and I hope that he will answer me. My hon. Friend mentioned the cost that falls on many firms. Part of that cost is that they pay subscriptions to the Securities and Investments Board to keep it running. Although my hon. Friend has said that the SIB is doing a good job, many firms feel aggrieved that there is little accountability for the way the money is spent or the administration of that body. The Select Committee on Trade and Industry has done an excellent job in producing the report. Why does it not ensure that the SIB is brought before it annually for proper scrutiny and press for a debate at least every year on the annual report of that body?

Mr. Warren: I have taken note of my hon. Friend's letter and I have brought it to the Committee's attention. We have a busy schedule, but my hon. Friend has reinforced his concern and we shall consider it as we come to our new programme in the month ahead.
Britain has over 330 banks of various types and they are almost unanimous, as are many other organisations, in that they are pleased with the responsiveness of the Department of Trade and Industry and the Government to representations made to them. However, they are


concerned that the dialogue should go on and on and that it should not be simply an occasional meeting. There must be a continual flow of information.
If the trade associations are to function properly, they must get good and efficient feedback to their members. The banks feel that there are still considerable problems in investment services, capital adequacy directives and others. If time permitted, I would have gone into detail. I shall not do so now, except to say that I hope to have an opportunity to write to my right hon. Friend the Secretary of State about the concerns.
The Government are pursuing the negotiations towards 1992. As my hon. Friend the hon. Member for Tiverton (Mr. Maxwell-Hyslop) is repeatedly pointing out, 1992 first becomes effective in 1993, and other hon. Members have pointed out that it will become effective much later than that as some of the German insurance companies are brought to heel and become as competitive as we are. I hope that the Government will recognise that the negotiations must look at the world context, which I mentioned at the beginning of my speech. In the negotiations proceeding with the European economic space, which the Select Committee has recently investigated, I hope that it will be seen that the new dimension provides partnerships which will be of interest to this country in the furtherance of its objectives in the EC.
In terms of the Government as a partner, it must be said that the criticism that often flows from the Select Committee is that it must be more efficient in terms of its regulations and negotiations. This is about ordinary people—the customer, the person with the bank account and those who invest in the privatisations that occur nicely and regularly. Above all, it is about the need for the Government to ensure that quality is available for all customers at home and those from across the world who want to invest.

Mr. A. J. Beith: I congratulate the Secretary of State on his promotion. When the lights in the Chamber suddenly brightened alarmingly, I thought that it was a belated attempt to give him the star billing that he achieved at the Conservative party conference. However, as it happened during the speech of the hon. Member for Redcar (Ms. Mowlam) I thought that perhaps Peter Mandelson had made his way into the building and that sweet music would shortly follow. Fortunately, all has been restored to normal, which is better for the rest of us who may not be improved by the shining of brighter lights.
I congratulate the Chairman of the Select Committee, the hon. Member for Hastings and Rye (Mr. Warren), on the excellent report, massive though it is. It said that we should join the exchange rate mechanism as soon as possible. It was published on 12 July 1989. Between that date and now there have been some competitive exchange rates at which we could have joined. I hope that the hon. Gentleman's recommendations are implemented more quickly in future.
We welcome the single market in all aspects, financial services and others, and seek to bring it to reality as soon as possible. In general, I support and approve of what the Government are doing in that respect. However, the

Government are wrong in their rhetoric. They have not really helped the British public understand what this is all about. Despite all the publicity produced by the Department of Trade and Industry, so much of what Ministers and Back Benchers say is about meddling Brussels bureaucrats daring to interfere in how we organise things in Britain.
In reality, much of it is about trying to harmonise standards so that no one country's products are disadvantaged in the market of another. Sometimes, that works against our immediate interest. However, the Government should not constantly deride, attack and ridicule that process. If they do so, people will never understand that, as with French lamb, in insurance services it is in Britain's interests that there is proper harmonisation and uniform enforcement of rules so that we have access to markets in other countries.
The test we should apply to harmonisation is whether it advances the interests of the single market. Of course it does not always do so, and we can criticise it on those grounds. Putting VAT on the acquisition of lifeboat equipment by the Royal National Lifeboat Institution would do nothing to improve the single market; nor does general VAT harmonisation seem to be necessary to the achievement of a single market. Some harmonisation of standards is required to ensure that our products are not put at a disadvantage by the imposition of different and, in some cases, artificial restrictions by other member countries. No doubt they will think the same about us from time to time.
I want to remind the Government about several areas of concern, some of which are in their minds already. The first is the position of independent advisers, including sole traders. That includes many FIMBRA members. They are the subject of the new regulations system, but their position is different from that in other member countries. Independent financial advisers have had a hard time of late in several respects, not least of which is that the rules of disclosure that apply to them have been more demanding than those applied to building societies where tied assurance arrangements are becoming widespread.
People are taking on insurance commitments without realising the financial advantages that have accrued to the people who sold them, even though it is sometimes a body as respectable as a building society. Against that background, independent financial advisers, who quite properly are subject to a developed system of regulation, need some assurance that their interests are being looked after and that their opportunities to trade will continue.

Mr. Hugh Dykes: Should we not quickly make further progress to ensure proper, clear disclosure of insurance brokers' commissions on the premiums of underwriting insurance companies' policies?

Mr. Beith: I agree absolutely. Whether it be brokers, building societies or any other bodies, disclosure is essential if a customer is to know what is going on, not least a customer who has started on the road to obtaining a mortgage but starts to realise some way down that road the financial transactions that lie behind the insurance that is being offered.
The second point that I want to draw to the Government's attention is the position of the insurance industry in general, and I was glad that the Secretary of State referred to it. The insurance industry provides


substantial regional employment in England and key employment in Scotland. In Edinburgh, increasingly in Glasgow and even in places such as Stirling, the insurance industry is a big employer. In the regional capitals of England such as Liverpool, Bristol and Norwich—

Mr. Doug Hoyle: Manchester.

Mr. Beith: Yes, but central Manchester is no longer the centre that it was because companies have moved further out into the leafy suburbs. Nevertheless, the insurance industry is an important regional employer and it is at specific disadvantages trading in Europe, of which the Minister is well aware and which must be removed if there is to be a genuine single market.
I have a worry about the passport system for all the various categories of financial trader, whether it be an insurance company, a security company or anything else. Certification in a company's own country being valid elsewhere is the right way to make rapid progress, but I should not like us to move towards a flag of convenience pattern, whereby companies are invited to move to a country of less stringent regulation, thus obtaining the passport to trade anywhere and yet be subject to less effective controls. The passport system must be accompanied by steadily growing uniformity of standard and regulation. We do not want a Liberia or Panama of the insurance or security industry world, whereby a country is attractive for a company to base its operations because regulation is less stringent and the consumer less well protected.
There is a further concern to which the Minister referred—ensuring that securities companies are able to trade and are not subject to unfair competition from the security operations owned by banks in other member countries. This revolves around getting the simultaneous approval of several directives. I was not clear whether, by suggesting that this is "proceeding apace", the Minister is confident that from day one of the financial single market there will be fair competition. We must ensure fair competition, and companies are seeking to do so, but we should like some assurance that it will be achieved.
A further concern is the takeover and merger differences between this country and other countries. British companies are severely subject to the threat of takeover and merger—a threat which is not present in some other member countries. That represents a significant distortion of the market, and we must address it. It is difficult, because in some respects the pressure for takeovers aned mergers in this country is oppressive, although it can also be argued that it is one means of promoting management efficiency, and its absence in some other member countries allows inefficiency to flourish. We must ensure that the extent of exposure to takeover, which is characteristic of British companies, does not place them at a disadvantage in the competitive market.
That raises some of the wider issues about how industry is financed and how financial institutions operate, because there are further differences between practice here and in other European countries. It is a common cry of industry in this country that a more long-term view is taken by German financial institutions than British ones and that their attitude to borrowing is different. The single market is an opportunity for us to enter that debate and to see whether we can change some of the short-termism that

Ministers have criticised, while opening up financial markets. That is one aspect from which we may be able to learn from other countries in Europe.
The last point that I wish to make concerns the position of the City of London in the system. Competition is brewing between London, Paris and Frankfurt. The decision to enter the exchange rate mechanism helps to secure the position that London has already earned because of the scale of transactions and the free market in London. It is my firm view that that position would be better enhanced if Britain were clearly committed to the single currency and to European monetary union in more than the nominal sense in which the Prime Minister accepts that concept. London will lose out badly without that commitment.
I think that it was a Deutsche bank adviser who said that the ideal European currency would be a currency with a French name, managed according to German principles from a central bank based in London. That is exactly what I want to see—a currency based in London, but managed with the attitudes to price stability and prudence that have characterised the Bundesbank for many years since the war. It is time that the Government, who are supposed to be in favour of combating inflation, took that principle on board. If we are, in the words of the Leader of the House, in the ticket office or the back carriage of the train, we impede London's opportunities to be the financial capital of Europe, which in so many respects it so obviously deserves to be.

Mr. Barry Porter: I shall do my best to be brief. That is normally a precursor to a very long speech, but it is a very long report from the Select Committee on Trade and Industry.
After months of modest meals and hard work, the Select Committee reached 20 conclusions and 37 recommendations. In retrospect, perhaps we involved ourselves in a scatter-gun approach, and it might have been better if we had brought those things together, but the fact that the Committee reached 20 conclusions and 37 recommendations shows the mind-bending complexity of the problem that we are considering. I should not dream of taking hon. Members from one to 20 or one to 37, but I shall emphasise those matters that seem of importance.
If we are using Latin tags, the Minister may recall the simplistic philosphical observation cogito ergo sum, which for his benefit means: I think, therefore I am. That cannot he applied to every hon. Member of this assembly. I have just invented something that might be appropriate to the Brussels directorate—directamus ergo existo. If I remember the Latin word for table, tablamus, it could be tablamus ergo existo, which clearly is not true. The fact that there is a directive or something is tabled does not necessarily mean that it exists in the real world, and certainly not in the financial world.
May I deal with the point made by the hon. Member for Berwick-upon-Tweed (Mr. Beith)? The Committee did not say that we should join the ERM as a matter of urgency. It said:
United Kingdom membership of the ERM or the use of a common currency would help to promote a single market in financial services but the absence of either
is not a major barrier to such a single market. We are 50 per cent. of the way there, although I suspect for different reasons.

Mr. Beith: The Committee said in a recommendation printed in heavy type that Britain should
join the Exchange Rate Mechanism of the EMS as soon as possible at a competitive exchange rate.

Mr. Porter: We are halfway there; 50 per cent. is not bad and I shall agree on that basis.
The Select Committee said that the policy of the Department of Trade and Industry of raising awareness of the single market has been timely and essential. It is important to avoid giving the impression that the single market in financial services will be complete or even approaching completion by 1 January 1993. That point has been made by the Chairman of the Select Committee and other hon. Members, but I repeat and emphasise it. No doubt 1993 has many attributes, but it will not happen in 1993.
I am sorry that the Government have been accused of complacency, although I must say that there has been an element of that. I am sorry, too, that the hon. Member for Redcar (Ms. Mowlam) went to the lengths of making a party attack on the Government, as our report was written on an all-party basis. Nevertheless, there was something in what the hon. Lady said and it deserves consideration by the Government. They may be well advised to apply the phrase that I heard in a seaside place last week—"Good enough, but not really good enough yet," or words to that effect.

Mr. Lilley: "Good, but not good enough."

Mr. Porter: That is it. Perhaps my right hon. Friend was listening more carefully than me because he had to.
We concluded that the single market will offer wider choice and potentially lower costs for consumers throughout the Community, but that such results may not be fully apparent by 1993. That is absolutely true. We should not pretend to the outside world that suddenly, on that day in 1993, all will be well; it will not.
I should like to emphasise a point to which hon. Members have already alluded: the slowness of the programme for achieving a single market in insurance seriously undermines the credibility of the single market programme in financial services generally. I know that, since the Committee reached that conclusion last year, a proposed directive has been tabled in relation to non-life insurance. That proposed directive, designed to widen a consumer market worth hundred of billions of ecu a year,
seems certain to arouse fierce resistance in such countries as Belgium and West Germany.
That is a quotation from The Sunday Times, so it must be right.
It is all too true that fierce resistance will be aroused in such countries and even though the proposed directive has been tabled, it will not necessarily be implemented in the foreseeable future. The only country that would benefit if the proposals were implemented in the next year would be the United Kingdom. There is no doubt that Germany, Belgium and other countries will resist their implementation vigorously. I urge the Government to oppose that resistance and to win.
People have already talked about Frankfurt and Paris as potential competitors for the City of London. I do not take such talk all that seriously. I do not think that Paris will be in the same league, although Frankfurt could be. I still believe that the single market, as and when it arrives,

will not be a problem but an enormous opportunity for the City of London. Its history, traditions and expertise will ensure that.
Hon. Members have referred to the question whether there should be a change in the regulatory structure created by the Financial Services Act 1986. I do not know; I receive contradictory comments and advice about it, although a particularly vigorous and authoritative source tells me that the structure is not working well from anyone's perspective and that it needs radical reform. Although the hon. Member for Redcar was asked about that matter, she did not come up with a suggestion, and I am not making a suggestion either: what I shall outline is a suggestion made by someone else.
The two-tier structure of the Securities and Investments Board and the self-regulatory organisations is redundant. The Financial Intermediaries, Managers and Brokers Regulatory Organisation, the Life Assurance and Unit Trust Regulatory Organisation and the Investment Management Regulatory Organisation should be abolished and their role subsumed entirely within the SIB. The Securities Association has a better case for survival. A centralised system would be more efficient, effective and consistent, and I am pleased to note that even the building societies are now calling for a common system of regulation for banks and building societies. Perhaps my hon. Friend the Minister will address his considerable intellect to those suggestions. He might even find an answer to the question.
This is a complex problem, but the sooner we get on with it, the sooner we shall achieve a single market. At the moment, progress is too slow and we are being held back in various matters by those who wish to protect their national interest even though they may spout the rhetoric of the new Europe. I agree with the Government that we are the ones who get on with implementing directives. But let us not fool ourselves into thinking that those in the other capitals of Europe are as enthusiastic as they say they are in public. It is certainly not what they say in private.

Mr. Stan Crowther: It is a rare pleasure to find the Government accepting so many of the recommendations in a report of the Select Committee on Trade and Industry. They have accepted so many that I am beginning to wonder where we went wrong.
I support the view expressed by the hon. Member for Hastings and Rye (Mr. Warren) that the time allowed for the debate is too short. This is an extremely important subject and we all recognise the very important role in the economy that the financial services industry plays. Not all of us are quite convinced that the extent to which some people in the industry are rewarded is entirely justified. Ministers constantly complain about demands for what they regard as excessive pay increases in manufacturing. They would do well to take into account the fact that, according to The Daily Telegraph at least, salaries in the stock exchange rose on average by 49 per cent. last year. Perhaps Ministers would care to comment on that.
I propose to refer to one aspect of the report—the part that deals with takeovers and mergers. I express my unreserved support for the Committee's recommendations especially that dealing with the vulnerability of United Kingdom companies. However, I do not agree with the


view held by some of my colleagues on the Committee, and certainly by the Government and the Commission, that takeovers and mergers are marvellous in principle and that all barriers should be removed as soon as possible. There has not been much evidence in recent years that bigger is necessarily better. One field in which the creation of bigger and bigger firms, many of them now conglomerates, is positively unhealthy is accountancy. A mere handful of very large firms now audit the accounts of the great majority of large companies throughout the western world. That cannot be a healthy state of affairs. It is a dangerous tendency and any further mergers among accountancy companies should be examined most carefully.
The fact that the firms have increased their size enormously in recent years by developing and expanding in management and tax consultancy activities must make the danger of a serious conflict of interest considerable—especially in view of the Law Lords' ruling not so long ago that auditors have no duty of care to individual shareholders or potential investors. Given that ruling, and given that an accountancy firm may be doing the auditing as well as offering management consultancy services, we are getting into dangerous waters.
It is high time that auditors were not merely allowed but legally required to report to the appropriate authorities anything suspicious that they find in the books of any company whose accounts they are auditing, even if they hope to do business with that company in another capacity—as management consultants or tax consultants, or in the provision of any other service that they may offer. If it were made a requirement to report to the appropriate authority anything that aroused the auditors' suspicions—a Community-wide and, it is to be hoped, a worldwide requirement—the public would be afforded some protection against what seems to me to be the relentless advance of international financial crime.
It is an interesting coincidence that two of the Select Committee's recent reports have a considerable bearing on the matter that we are discussing tonight. Not long ago, we examined in great depth the information technology industry and more recently we looked at the growing problem of company fraud. During our inquiry into the detection and prosecution of people who engage in various forms of financial crime, many of us became more and more alarmed at the apparent ease with which substantial frauds and thefts can be committed with a very good chance of being unpunished. The scale of that crime is literally immeasurable. No one knows how much of it goes on, but we took sufficient evidence to convince many of the Committee members that there is an alarming level of such crime.
One little indicator of the level of that crime is that the Serious Fraud Office is not interested in anything less than £1 million. That may be the Serious Fraud Office's definition of serious, but many of my constituents would regard a fraud involving one tenth of that sum as very serious. Perhaps that gives us a guide to the scale of the problem in the City today.
I share the concern expressed by my hon. Friend the Member for Redcar (Ms. Mowlam) that the Secretary of State appears to be in some danger of sinking into the same puddle of bland complacency from which his predecessor was quite unable to escape. No matter how many

opportunities we gave him to escape that complacency, we could never persuade him to do so. I hope that the new Secretary of State will not take the same view.
I am not suggesting for a moment that financial crime is new. It has been going on for centuries. However, a new dimension has been added by the fantastic development of information technology. Billions of pounds can now be moved around the world at the drop of a hat or, more precisely, by pressing a button. That makes the matter far more serious. I get the impression that the agencies responsible for regulating the financial services and detecting crime are fighting a losing battle in trying to keep up with developments. There is clearly a need for much closer contact—and I believe constant contact—and co-operation among the various agencies throughout the world which are responsible for crime detection. In the Select Committee we received little evidence that that kind of co-operation is happening on the scale required.
Modern information technology is clearly as available to the forces of law and order as it is to the crime syndicates. However, the criminals seem to be winning at the moment. On the rare occasions when people are caught and hauled before the courts, if they are convicted the penalties tend to be derisory in this country, although perhaps not elsewhere. They are derisory here especially if the criminal concerned happens to make a contribution to a suitable charity.

Mr. Hoyle: Or political party.

Mr. Frank Haynes: The Conservative party.

Mr. Crowther: I would hardly dare to mention the Conservative party in that connection.
If we ever have a single market in financial services—I do not know whether we shall and the Select Committee warned that it will not happen as quickly as some people think—I should certainly welcome it in principle. Properly regulated, properly monitored and properly policed, it could be advantageous to consumers whether they are investors or pension fund beneficiaries. A single market could be very beneficial if it is properly run and regulated. However, I am afraid that lowering the barriers will make it easier for criminally minded people to pursue their frauds on a much wider scale. There is a danger that we may be creating not so much a single market in financial services as a single market in financial crime. That point needs far more attention in future that it has had in the past.

Sir Robert McCrindle: Like other contributors to this debate, I propose to encapsulate my remarks in a short speech. I want to draw attention to two matters of concern: the unit trust movement, which I believe has not been referred to so far in this debate and secondly, and perhaps more importantly the effects of the capital adequacy directive on financial intermediaries.
I begin from the premise that, if 1992 is to provide opportunities for the United Kingdom in Europe, I suspect that it is common ground on both sides of the House that we should be seeking a level playing field between different types of investment in this country and also with regard to the differing tax regimes in relation to financial products in the United Kingdom and elsewhere. If such a level playing field can be created, I contend that the British financial services industry can compete.
At the moment, the tax regime for unit trusts operates very much against British companies. United Kingdom unit trusts are unique in paying corporation tax on their income. According to my information, no European fund suffers an equivalent tax. United Kingdom unit trusts should be allowed to distribute to European investors an amount equal to the tax credit to which United Kingdom resident investors are entitled, so as to place United Kingdom unit trusts on a more competitive footing.
If we achieve that level playing field, we can expect the industry to rise to the challenge. It would be ironic if we in the United Kingdom, the pioneers of the whole concept of unit trusts, were to be left behind as the single market approached, not because of some lack of efficiency on our part and not even because of an imposition by the European Commission but, dare I say to my hon. Friend the Minister, because of a tax regime dictated by the United Kingdom Treasury. If we could have the general support of the Minister when he replies for a movement towards that more level playing field, he and the Government would not be disappointed in the response from the unit trust industry in the United Kingdom.
I want now to consider the effect of the capital adequacy directive on small to medium financial intermediaries. Perhaps I should, not for the first time, declare an interest as an adviser to the British Insurance and Investment Brokers Association, many of whose members fall within the A2 category of membership of the Financial Intermediaries, Managers and Brokers Regulatory Organisation—that is, those who are broadly speaking not authorised to hold money but who may advise and effect financial arrangements.
Part of the problem stems from the lack of understanding by our European partners of the concept of independent financial intermediaries, and particularly of small independent financial intermediaries. The case was mentioned earlier of their failure to understand the importance of insurance brokers in this country, and the House will be aware that many insurance brokers are indeed small to medium financial advisers as well.
If that is the reason for the difficulty as the capital adequacy directive confronts us, and if continental insurance fails to grasp the fact that, in this country, one does not have to be a large, very well capitalised institution before one can perform a perfectly respectable service, I hope that our Ministers and officials, as they debate the capital adequacy directive, will draw to the attention of our opposite numbers the fact that they are comparing apples and oranges and asking as what type of apples we should prefer.
I would like to see the A2 category FIMBRA member included within the scope of the investment services directive and thus have the European passport to which reference has been made, but be exempted from an inappropriate level of capital under article 3 of the capital adequacy directive.
The Financial Services Act 1986, to which much reference has already been made—I served on the Standing Committee some years ago with my hon. Friend the Member for Chichester (Mr. Nelson)—has received widespread criticism. Whatever the rights or wrongs of that criticism, there is no doubt that it has taken its toll on intermediaries in this country. Because of the difficulties of

continuing their independent role, many of them have chosen to go on tied to insurance companies, just at a time when there is a great need for independent financial advice.
Perhaps I should make it clear that we must make sure that the EC directives which are threatening—I do not put it too strongly—the continued existence of those financial intermediaries which remain do not place additional and unnecessary burdens on the independent financial intermediary, just as I hope that EC directives will give an opportunity for fair competition among intermediaries within Europe.
Reference was made in passing to the disclosure of insurance commissions. In an ideal world, there is no defence against failure to disclose commissions. My hon. Friend the Member for Harrow, East (Mr. Dykes) and the hon. Member for Berwick-upon-Tweed (Mr. Beith) failed to note that—to go back to the level playing field again—if it is expected that independent financial intermediaries, amidst all the other impositions of the Financial Services Act, are duty bound to disclose their commissions, so too in some shape or form should be those who are either part of the sales force of an insurance company or have become tied intermediaries.

Mr. Beith: indicated assent.

Sir Robert McCrindle: I am glad to see the hon. Member for Berwick-upon-Tweed indicating assent. What is sauce for the goose must be sauce for the gander.
In his vendetta against the independent financial intermediary, as he comes back time and again to single them out because they do not declare their commissions in the way in which he would like, Sir Gordon Borrie has overlooked that fundamental point. One of the messages from this debate as we move towards the single market of 1992 is that the independent intermediary has already been substantially pilloried by the regime of the Financial Services Act. I do not say that as a reason to scrap the whole thing. It is too easy and too glib to say that, without thinking carefully of what we would put in its place.
I firmly believe that the financial intermediary must be seen as an extremely important part of the financial life of this country. Therefore, if an imposition is to be placed upon him, it should be no more and no less than the imposition that is placed on his competitors.
The EC's definition of liquid assets in relation to capital adequacy seems to be unduly restrictive. It will be difficult enough for some small operations to show capital required, and that is assuming that the United Kingdom gets its way in the discussions on the directive. It will be very difficult indeed if we go on with the restrictive definition of liquid assets. At the moment, it would be extremely difficult if some assets were not allowed to be classified as liquid.
The Minister is well aware of the important role that is played by unit trusts and independent financial advisers to which I have drawn the attention of the House once again. I ask him, in the negotiations that lie before us, to make sure that the EC of 1992 and beyond liberates our companies and gives us the incentive to benefit from the wider market. Whatever else it might be, it should not and must not be restrictive.

Mr. Jim Cousins: One of the unfortunate things about the debate is that a long time has elapsed since the Select Committee produced its original report, and events have moved on. Last Friday, we heard that the country was to join the exchange rate mechanism. That announcement made a substantial difference to many matters that were discussed in the Select Committee's report. Only now that we have entered—according to the Chancellor—a period of stable exchange rates with Germany and France will it be possible to test the Government's supposition that regulatory switching of financial services activity between lighter and heavier regulatory regimes will not take place. That matter is now sharply to be tested.
Similarly, now that we have joined the ERM, we shall see what the City of London is really made of. It will now be possible for investments to be safely carried out on a far larger scale, that is investments in the stock markets of Europe rather than in the stock markets of Britain. The competitive position of the City of London, which was of great concern to the Select Committee when it reported in 1989, is now under much harder scrutiny. We can be far less certain that the Government's optimistic conclusions, outlined in their response to the Select Committee's report, are soundly based.
We also had before us the fast-changing position with regard to the United States and Japan and their role in the City of London. The City of London's strength as a financial market has largely depended on being the vital intermediary between the capital of the United States and Japan and its performance and investment inside Europe. There is now good cause to doubt whether that feature of strength in the City of London will continue. We should closely examine that matter.
We can now also see far more clearly than we could when the Select Committee reported just what the Financial Services Act regulatory regime might bring. Many of the cases that gave us concern when the Select Committee was doing its investigation originated before the passing of the Financial Services Act. We can now see coming forward a whole raft of new cases that were born during the operation of the Financial Services Act regime and still give grounds for continuing concern.
Even as we speak, accountants from Coopers and Lybrand are scouring Europe and parts of the middle east to track down where £200 million of Polly Peck's money might be found. That is a serious matter. We hope that the money is found. However, such matters give grounds for real concern about whether the Government can afford to be complacent about the regulatory regimes that were laid in place at the time of the passing of the Financial Services Act 1986. It cannot be doubted, either, that many practitioners in the City are sceptical about whether the regulatory regime that was laid in place then is at all appropriate for the present situation.
Of course, the focus of the regulatory frameworks of the Financial Services Act regime are on regulatory procedures and authorisation procedures. We can see much more clearly now than we could either in 1989 when the Select Committee reported or in 1985 when the Act was being passed that that is perhaps not the correct point of emphasis. The correct point of emphasis should be the competence of the professional who is engaged in the

business, the effective compliance procedures inside the firms that are conducting the business, and proper action against wrongdoing when it can be perceived.
The paper bunker of regulation into which the British financial services industry has been forced will not prove an adequate protection. It is not simply a matter of the scandals and the corruption that are occasionally revealed that is the worrying thing, but the normal routines, the concealment, doubt and uncertainty about what is really going on.
My hon. Friend the Member for Rotherham (Mr. Crowther) rightly drew attention to the role of accountants. The financial press has today reported that the Chartered Institute of Management Accountants has now produced a report which is honest enough to admit what has been clear for some time—that one needs a health warning before one looks at company accounts. What one sees in those accounts may not represent all there is, and what one does see may not be there. This is a matter of great concern, and the Government would be unwise to be complacent about the fate of the basic routines of accountancy.
Doubts have been introduced about the quality of British accounts. As a result of the Companies Act 1989, an accountancy regime has been established. The heads of that regime are now admitting that there are profound problems concerning what one sees in company accounts, inflation accounting, the use of good will, the different definitions of mergers and acquisitions, and the way in which that may enable the manipulation of accounts as well as about other things that can be manipulated so that they do not appear on the balance sheet at all. Given that the heads of the accountancy profession have admitted to those problems, the Government cannot simply stick by their response to the Select Committee report, especially as it was produced in another era.
My hon. Friend the Member for Redcar (Ms. Mowlam) was right to say that the problems we have outlined are not the private concern of a club—we can no longer see the City of London as a club in which rules of behaviour are internal to the system rather than subject to public regulation. Such regulation may well require statutory agencies to enforce high standards. My hon. Friend also made a sound point about the creation of small shareholders, but of even greater importance is the fact that we have already socialised the ownership of industry and our services through the insurance industry and occupational pension funds.
Common ownership has been achieved, but the consequences that flow from that, and the extra requirements they make upon the regulatory systems and standards of conduct of those who operate on behalf of those common owners, have not been perceived. The Government must address that. I doubt whether a framework more appropriate to the Sock Shop capitalism of the 1980s is one that we should allow to endure.

Mr. Peter Viggers: Financial services represent one of the great successes of the United Kingdom economy. The London stock exchange is pre-eminent in Europe, with a market capitalisation of $500 billion compared with $160 billion in Germany and $100 billion in France and Italy. London's pre-eminence is even more noted regarding foreign exchange. The daily


turnover of foreign exchange in London is $90 billion, compared with $50 billion in Tokyo and New York. Our financial services are a great success and, in terms of banking, we are part of a truly international market in which we are predominant.
The circumstances surrounding insurance are somewhat different. The OECD countries hold some 94 per cent. of the $500 billion a year premiums in the world; the United States has some 45 per cent. of that market, Japan 14 per cent. and the European Community countries 30 per cent. The 30 per cent. held by EC countries is fragmented. The largest market is in Germany, where there is close protectionism, the third largest is that of France where there is a great deal of state ownership, but the second largest market is that of the United Kingdom, the most open. It is therefore important to approach banking and insurance in different ways.
In banking there is a lot to play for. The Cecchini report suggested that there are £15 billion of benefits to be gained on a one-off basis from joining together the European financial markets. That is equivalent to about 22 billion ecu as we must learn, I suppose, to say.
On a personal level, it is important to realise how much there is to gain from harmonising the European markets. If someone undertook a round trip of the European capitals and changed his spending money in each of those capitals he would return having lost more than half of his spending money as a result of dealing charges and losses on the official exchange rate. There is a great deal to play for, but we must remember that there are some risks and losses.
Reference has been made to the Financial Services Act 1986, which is not only a tight regulation of the financial institutions of the United Kingdom, but an expensive one. There is a risk that less well-regulated banks operating here might be able to operate with less expense and therefore be more competitive than our own institutions. It is important that we agree host nation monitoring—essential minimum harmonisation. Should it be necessary for the United Kingdom to change its regulations to ensure that our financial institutions are not at a disadvantage compared with other European countries, I hope that the Minister will bear in mind the risks and take steps to make the necessary modifications.

Mr. Maxwell-Hyslop: What about the consumer? As it is now, years have gone by without any increase in the compensation limits despite nearly 30 per cent. inflation. Is my hon. Friend suggesting that, with that miserable record of compensation we should lower our level still further if continental countries do so?

Mr. Viggers: My hon Friend is referring to insurance rather than banking and I shall refer to that shortly.
I hope that my hon. Friend the Minister will also bear it in mind that it is important that EC developments are consistent with operations in non-EC countries. That is particularly important for the United Kingdom, which has much insurance business outside the EC. Perhaps I should declare an interest as a member of Lloyd's although I cannot see that it is relevant, but that might save some Opposition Member from asking whether I have declared that interest.

Mr. Hoyle: Speak up.

Mr. Viggers: I beg the House's pardon, but I am gabbling to save time.
We are concerned that the changes in the EC should not be to the detriment of United Kingdom institutions operating outside the Community. An undercapitalised Portuguese bank that sought to open in the United States might find that it was unable to do so because of United States regulations. If there was full, obligatory reciprocity of recognition within the EC, it might follow that a United States bank seeking to open in the United Kingdom could be barred from doing so because of those reciprocity rules. I am sure that my hon. Friend the Minister will bear that important point in mind, as it is of concern to the financial institutions.
There is also concern as a result of the investment services directive. Banks operating in the EC should not only be able to join EC stock exchanges and operate as investment advisers and operators within those exchanges, but they should not be barred from operating as investment advisers and from the execution of investment matters on behalf of clients outside those stock exchanges. In some parts of the EC, it is felt that banks should not be able to join stock exchanges, but in other parts of the Community it is felt that they should operate only within those stock exchanges.
So far we have heard little about shareholders. I am proud to say that the Government have doubled and redoubled the number of individual shareholders in the United Kingdom. The fact remains that the percentage of shares held in the stock exchange by private shareholders has fallen from 60 per cent. in 1960 to only 20 per cent. now.
I for one feel a great sense of disappointment that the number of individual shareholders continues to fall. There are several reasons for that—one is the cost of dealing for individual shareholders. I am concerned about what individual shareholders who have been encouraged by the Government to become shareholders for the first time will do when they try to calculate how much it will cost them to sell their shares and what the implications might be in terms of dealing cost and the inconvenience of having to declare for tax purposes any profit that they make.
I am also concerned that some companies have felt it necessary to set up their own systems to enable their shareholders to sell and buy shares. 1 believe that Cable and Wireless, British Gas and Reed have done that. That is not a helpful way ahead.
The insurance industry is riddled with complexity and vested interest. There are various standards in different European countries, including in the preparation of accounts and reserves, the handling of claims and legal procedures. There are many vested interests, in some cases assisted by Government. The French Government have a vested interest in the state insurance company's operations in France. The Italian Government require 30 per cent. of insurance premiums to be ceded to the state company, INA. Switzerland, although not in the European Community, provides a monopoly for fire insurance in each canton.
I welcomed Sir Leon Brittan's suggestion in November 1989 that there should be a single passport or licence—home country authorisation. Ideally, we should have harmonisation, but that would be exceptionally difficult. Therefore, the best route seems to be the creation of minimum standards throughout the European Community. Meanwhile, some companies are taking the


second best route of cross-border purchases, mergers and acquisitions. That is the second best route because it requires the companies to operate in accordance with the laws of the country in which they made their acquisition. However, it is only the second best route and I urge my hon. Friend the Minister to press ahead as fast as he can with an effective single market as the long-term objective.

Mr. Doug Hoyle: I am pleased to join in this debate, not only as a member of the Select Committee but as president of the Manufacturing, Science and Finance union, a large number of whose members work in financial services. I have been interested in the debate and one point that struck me is that, despite the reassurances given to the Secretary of State—I am sorry that he is not here—by the hon. Member for Hastings and Rye (Mr. Warren) that the Secretary of State's future was secure, I thought his was a pedestrian and lacklustre speech. When the Secretary of State goes to bed at night and has nightmares about all his predecessors, he may also find himself the victim of short-termism, as the Government call it.
The hon. Member for Gosport (Mr. Viggers) was right to emphasise the importance of the industry of which we are talking and which makes up 10 per cent. of the gross national product. In 1987, the industry gave a surplus on invisibles of £7·658 billion, which is considerable. I stress that we must not be complacent, because all the signs, including our earlier debate on ERM, point to the fact that Germany—the Bundesbank—is dominating the financial position in the European Community. That is why we must not be complacent or think that what is happening in the City of London, Edinburgh and the regions will be with us for ever. We must wake up to the fact that there will be increased competition and that Germany is growing in importance. If we do not, one day, probably not in the immediate future but certainly early in the next century, we shall wake up to find that, far from the City of London being in the premier exchange position, it will be Frankfurt.
As president of Manufacturing, Science and Finance, I am concerned about what will happen, particularly in the insurance industry. There is no doubt that we can provide life insurance at a third of the price of our European competitors. As has been repeatedly said today, the problem is that we are subject to takeovers in this country in a way that the Germans, French and Italians are not. It is easier to take over the Vatican than an Italian insurance company, which is almost impossible to do.
Takeovers occur all the time in this country because our companies are far more vulnerable than those in other countries. The German Allianz has taken over Cornhill, Signa (American) has taken over Crusader, and the French Axi-Midi has taken over Equity and Law. Another interesting example is that the French state-owned insurance company, UAP, owns 18 per cent. of Sun Life, which has an arrangement with Liberty Life by which they can bid for each other's shares. It will not be too long before Sun Life is taken over by a French state-owned company. I do not know how the Government will react to that.
We must ensure that the financial industry, which matters to us, has a prosperous future. I do not speak from the point of view of the investors in the industry or those

who deal in shares in the City of London, but from that of the employees in the industry. We must ensure—because they built up the companies that those employees have a future. In any of our dealings, we must ensure that we protect their interests.
The Minister was cavalier in jumping up and asking our Front-Bench spokesperson, my hon. Friend the Member for Redcar (Ms. Mowlam) what she would do about the self-regulating bodies. The answer has come from Conservative Members. I do not think that one Conservative Member has stood up to defend such organisations, which are far too bureaucratic and costly, and of which there are too many. There should be rationalisation. I do not think I am alone in the House in believing that the era of self-regulation must come to an end. There must be statutory regulation, with far fewer organisations that are more efficient and less costly.
I hope that the Minister will bear in mind the fact that we should not bear an unnecessary burden when competing against other countries in the European market. I hope that he will also agree that, with our great insurance base, we in this country cannot allow other companies to operate from behind the barriers, which must come down. I hope that he will be fighting our corner to ensure that we maintain not only a great industry, but London as the financial centre. I warn the Minister that time is short.

Sir Anthony Grant: Yes, time is short—we have three minutes, to be precise—so I shall immediately declare an interest in Bowring (UK) Ltd and Barclays bank, both of which are affected by financial services legislation.
I agree with the hon. Member for Warrington, North (Mr. Hoyle) that there is a need for change in the regulatory system. I favour abolishing the two-tier system, but I cannot develop that argument, because I want to talk about insurance, a matter that has dominated the debate.
Our insurance is the best; it is the most skilled and best regulated in the world. When I was at the Department of Trade and Industry, I believe in the same position as my hon. Friend the Under-Secretary of State for Corporate Affairs, there was the Vehicle and General insurance scandal, when everyone woke up and decided that it was important to regulate insurance. Now, we probably have one of the best regulated industries there is, particularly after the Lloyd's Act 1982, which I took through the House. That made our industry well respected, but also the subject of considerable envy. It creates £3 billion net earnings and provides 340,000 jobs. The restrictions in the EC have inhibited development and deprived the consumer of a better service.
If we are looking to the single market for the opportunity to break down barriers, we must accept that progress has been slow. On a visit to Brussels, the hon. Member for Rotherham (Mr. Crowther) tackled the issues vigorously, but I felt that—apart from Sir Leon Brittan—officials did not have the required sense of urgency.
The latest proposals published for non-life insurance are designed to widen consumer choice and cut premiums; however, it seems likely that there will be all sorts of objections from Germany and Belgium. I hope that the Minister will carefully study the suggestion that the Germans—because they do not understand anything


about broking—must pass a great deal of legislation and will use it as a spurious reason for delaying what is a most important reform.
Competition is the name of the game: it is immensely important, and is the main thrust of our policy. However, open competition must be accompanied by good conduct. Here, to some extent, I agree with the hon. Member for Rotherham, although not in party political terms. The overwhelming majority of people working in the City are of the highest integrity—I spent some 20 years of my working life there—but in recent years the square mile has become infested with a small minority of newcomers who—as I have said in the House before—are long on cunning but short on morals.
The old saying in the City was that a man's word was his bond; as I have also said, if a man says that nowadays, one tends to take his bond. Some of the loot from dishonest activities there makes the great train robbery seem like minor pickpocketing. The Lloyd's Act 1982 prevented further incidents like the Peter Cameron-Webb scandal, which did immense harm to Britain's insurance reputation, especially in the United States.
This Government have done probably more than any other to crack down, through legislation, on insurance and company scandals. I give them credit for that. But we must not be just the most efficient providers of financial services in Europe; I want us to be regarded as the most honest and the most honourable.

Ms. Joyce Quin: This has been an interesting debate. I share the view expressed by many hon. Members on both sides of the House that it is a shame that we have had so little time to deal with the issue, especially given the comprehensive nature of the report of the Select Committee on Trade and Industry.
Not surprisingly, a major thread of the debate has been the concern expressed by hon. Members—again, on both sides of the House—about the unevenness of the playing field likely to be created in the single market in financial services. The Government's assurances at the beginning of the debate struck me as inadequate; I do not believe that they will tackle the problem.
An example is the Government's response to recommendation 7 of the report:
We recommend that the Government should address itself to the vulnerability of United Kingdom financial institutions to hostile takeover by a company from elsewhere in the Community.
Their response was:
The Government believe that we should press for the removal of barriers rather than erect new ones of our own.
That, surely, is not an adequate response to the problem of the bid-proof nature of many companies in other European countries.
When opening the debate for the Opposition, my hon. Friend the Member for Redcar (Ms. Mowlam) rightly said that the Government were being complacent. I think that they are also being naive if they feel that other countries will automatically accept their view of what the rules of the game should be. It has been interesting to listen to some of today's contributions, especially from Conservative Members. It is clear that many of them agreed with us that the Government were being both complacent and naive.
An example—not related to financial services, but none the less important in the European Community—is state aid. The Government have frequently criticised the level of state aid given by other countries, but recent figures show that other countries have given high and consistent levels of state aid during recent years. All the Government's preaching on that subject has been to no effect. It is not good enough to say that we hope and expect everyone else somehow, magically, to follow our example.
Today—in submissions to me and, no doubt, other hon. Members—the Association of British Insurers said that it was worried about the possible unevenness of the playing field in taxation matters. While I agree that a totally harmonised taxation system is not needed to make the single European market work, the Government must nevertheless be vigilant about the big differences in taxation that may undermine whatever other directives are agreed. Clearly many hon. Members share our concern: I noted particularly the speeches of the hon. Members for Wirral, South (Mr. Porter) and for Hastings and Rye (Mr. Warren), who seemed to express concerns that are dear to our own hearts.
My hon. Friend the Member for Redcar rightly laid stress on consumer protection, and I am glad that her view was reinforced by the hon. Member for Tiverton (Mr. Maxwell-Hyslop). I should like the Minister to tell us what consultations have taken place with consumer organisations in the United Kingdom.
In response to the report by the Select Committee on Trade and Industry, the Government said that they accepted the recommendations on consumer involvement. Perhaps they can tell us what organisations they will be meeting and what will be the time scale involved, if we are to ensure that when the single market in financial services is created there will also be proper standards for consumer protection. To date, the signs are that the proper standards will not be in place, and—not surprisingly—many hon. Members have expressed concern about that. It is important that there should be information on redress, and proper levels of compensation below which European Community states should not go.
The consumer-protection budget in the European Community is tiny. I am disappointed that the European Council allocated such a small amount in the budget for 1991: 0·018 per cent. of the total budget, which compares very badly with the amount available for the support of tobacco production, for example. There needs to be a change of priorities—not just by our own Government, but by other Governments examining the European Community consumer budget. I accept, of course, that it is not just money in the budget that will solve the problem; directives, too, will benefit the consumer at the end of the day.
Not surprisingly, the insurance sector has exercised the minds of many contributors to the debate. It is of particular importance, because the United Kingdom insurance sector has a great interest in the opening up of the market in financial services. It is also true—unfortunately—that there has been a worrying decline in our invisible export earnings in recent months, and the share of that decline accounted for by the insurance sector is considerable. All is not well, and the Government should address that point.
Several reasons given by hon. Members tonight show that it will be a long, slow haul to achieve a common market in insurance. We need greater vigilance than seems


to have been exercised up to now. For those reasons, I was surprised at the statement by the Chancellor of the Exchequer, who said that the European market in financial services was almost complete; if he reads the recent publication by the Department of Trade and Industry he will note the number of directives that are still outstanding, and will mean thorny and difficult negotiations in the European Community in the coming months.
The problems of the Export Credits Guarantee Department are also mentioned in the report. They have not had a great deal of attention during the debate—although, if the Government go ahead with their threat to privatise part of it, no doubt that will be the subject of controversial legislation later on. So far, in the internal market, there is no pressure to privatise the ECGD; the Government seem to be doing so as a result of their own dogma rather than any other imperatives.
It appears that the French state export agency is to be allowed to underwrite risks for foreign exporters: if a French export agency can do that, why cannot our own state export agency? There is no doubt that exporters in Britain are worried about the proposals for the ECGD, as a recent article in this week's Financial Times makes clear.
Some worries have rightly been expressed about the regional implications of the creation of a single market in financial services. My hon. Friend the Member for Linlithgow (Mr. Dalyell) referred in an intervention to worries in Scotland, for instance. The Government must give far greater priority to this. There is evidence that the European Commission is studying it, and the Government should too.
Not surprisingly, the Select Committee's report gives considerable space to the problems of transport infrastructure in Britain which affect both the financial centre in London and the other centres outside it. I do not know whether the Minister has seen the recent edition of Lloyd's Log, entitled, "Jams today…The threat to the City's financial future". After 11 years of neglect of our transport infrastructure the Government are now trying to catch up and deal with a problem which is largely of their own creation.
The Government have presided over a massive decline in our balance of payments. It is alarming not only that the manufacturing deficit is so great but that the surplus on the service side and on so-called invisibles has deteriorated sharply. While we believe that the single European market will be immensely important to the future of our financial services industry, we do not believe that the Government are doing enough to deal with the problems. It would be good to think that the Secretary of State, new as he is to his job, would take a fresh look at the issues affecting his Department. Unfortunately, it looks as if he is already weighed down with the dogma and short-termist attitudes of his predecessors—attitudes which have disadvantaged both our manufacturing and our service sectors.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood): The hon. Member for Redcar (Ms. Mowlam) and several other Opposition Members seemed to think that cases of malpractice being unearthed or of criminals being brought to book implied that something was wrong with the system. It is the first time that I have heard the theory that, if the police are

successful on detecting crime, that means that they are not doing a good job. Such cases show that we have put in a tougher regulatory framework and that we are pursuing wrongdoers as we should. If only the Labour party had done that before, we should not have had our work cut out to put through the legislation that we have.
The hon. Member for Redcar also said that the Government were making no effort to improve regulatory co-operation with overseas bodies. I have just returned from Washington, where I was pleased to sign with our Japanese and American counterparts the Airlie House declaration. We recognise that financial business is driven by technology and business pressures towards global trading. It is becoming ever more important, therefore, to hammer out common accounting, capital adequacy and other prudential standards on a worldwide basis. The agreement that we have signed is a major advance in that direction.
The document recognises the growing volume of cross-border business in financial markets around the world, and pledges the three major market authorities in London, New York and Tokyo to work more closely together to facilitate further growth in that business.
The agreement enshrines two important principles. The first is mutual recognition backed up by some common standards. When each country is thinking of changing its rules or systems, it will consult the other two to see whether changes can bring practices more into line. The second is co-operation to assist each other in tracking down malpractice and crime. The United Kingdom is well advanced in widening its memorandum of understanding with the United States to exchange information and to carry out investigations on behalf of each other. About one case a week now causes that co-operation to be undertaken.
There will also be close co-operation to monitor the prudential position of major multinational firms. The Government will do everything in their power to ensure that the international regulators talk to one another and track down criminal activity even when it tries to run across borders in search of safety.
The hon. Member for Redcar seemed unaware of the many new dealing services for small shareholders which are now growing up. The Government welcome them and agree with comments made in the House that there should be easy access to good dealing facilities for all who have shareholdings, however modest they may be. Progress is being made in that respect.
The hon. Lady and her colleagues also seemed unclear about what structure of regulation they want. She tells the House that she agrees with the Government that the present system should be given time to settle down—we believe that strongly. More change would mean more disruption, more cost and more elaborate structures. However, the hon. Lady goes on to say that she wants to change the system in a fundamental way but is not prepared to tell the House exactly how. We await her reconsideration of a new structure, when she will have to demonstrate why it would be cheaper and better. Given the way in which institutional changes by the Labour party have gone when it has been in government, it would be surprising if the system turned out cheaper and better as a result of the changes that Labour suggested.
The hon. Lady concluded by saying that, under a Conservative Government, the City would need a boundary review. I agree. I think that the boundaries of


the wider City will grow ever wider because of the success of the industry, which has grown in ways that many of my hon. Friends have pointed out in the debate. I look forward to positive and confident 1990s for the City under this Government's tutelage, because we shall work closely with the City to ensure that its businesses can expand and take advantage of all the directives and opportunities that the single market will undoubtedly produce.
My hon. Friend the Member for Hastings and Rye (Mr. Warren) raised the issue of the number of regulators. I must tell him that we need the current exchanges; they are important bodies and they have a range of functions that facilitate choice and competition. But if self-regulatory organisations wish to merge because they think it in their members' interests to do so—it may, for example, lower the costs or improve the quality of regulation—the Government are delighted. The Government will not insist on it, however, because they recognise the divergent interests and concerns of the different members of the different self-regulatory organisations. These things will work only if done on a voluntary basis.
Many hon. Members should concentrate on the fact that it is not so much the institutional framework as the style of regulation that matters when examining the trade-off between its costs and its benefits. The Government believe that we are coming to the end of a period when a lot of effort had to go into rule-making and institutional change. We are working closely with the Securities and Investments Board, David Walker and others so that, in the new phase, we can concentrate less on prescription and detailed rule-making and more on investigation, compliance and detection, because that is what is needed.
It does not help matters if the regulators are continually thinking of yet new ways to tie up in knots the existing compliant businesses—the broad mass of businesses in the City that are doing a good job. The regulators are and will be judged by their success in tracking down the tiny minority who are guilty of business malpractice or criminal deeds. We are putting our efforts into tracking those people, and we are urging the regulators to do the same—

Ms. Mowlam: Oh yes?

Mr. Redwood: Yes, the Government have put a great many resources into detection and investigation—by setting up the Serious Fraud Office and ensuring that it can pursue the cases that come to light thanks to the tougher climate created as a result of our work.
I promise the hon. Member for Workington (Mr. Campbell-Savours) that if he can bring forward evidence

of malpractice in any particular deal we, or more importantly the stock exchange authorities whose job it is to do so, will look at it. If the hon. Gentleman knows anything about insider dealing or other criminal practices, he should refer the evidence to the proper authorities and not cast aspersions in the House unless he can back them up with evidence that the authorities will look at.
Several hon. Members asked about the timing of the directives and whether we can bring the whole single market in financial services together ready for 1 January 1993. The Government intend to do all that they can to see that the negotiations are concluded. The banking directives have been agreed; the investment services directive and the capital adequacy directive could be agreed within the next few months.
One of the important purposes of the debate is to give us guidance on the details that need to be put right, particularly to help independent financial advisers, and to help some larger businesses with matters such as liquid assets. We have listened carefully to what has been said and we shall of course carry these issues forward in our negotiations. If we can get the right deal by the end of the year, we shall sign up to it; if it takes a little longer, so be it, because it is important that our independent financial advisers and our major players in the stock market should have access on the right terms, under which capital requirements are related entirely to the risks being run and they are not burdened with unnecessary capital requirements when they are not carrying undue risk.
I agree with many hon. Members including my hon. Friend the Member for Wirral, South (Mr. Porter) that on the insurance side, matters are proceeding too slowly. There are doubts about whether the whole of the insurance regime can be up and running by 1 January 1993. However, failure to reach that target will not be for lack of trying by the Government—we are urging our partners to work with us towards a speedy resolution of all outstanding issues on the passport directives. As a result of our efforts, one directive has been tabled and we shall get it to a working party for extensive negotiation.
It is also largely because of our requests that the Commission has promised to bring the other directive for First Reading in the Council of Ministers before the end of the year. The Government will put their full weight behind reaching a fair settlement in this area. As many hon. Members have said, there cannot be a completely open market in financial products if insurance is stymied for lack of the legislative action that we all seek. The hon. Member for Rotherham (Mr. Crowther)—

It being Seven o'clock, and there being private business set down by THE CHAIRMAN OF WAYS AND MEANS, under Standing Order No. 16 (Time for taking private business), further proceeding stood postponed.

Redbridge London Borough Council Bill (By Order)

Order read for consideration of Lords amendment.

Lords amendment: In page 4, lines 9 to 17, leave out clause 6.

Mr. Vivian Bendall: I beg to move, That the amendment be now considered.
Hon. Members may wonder why I rise to speak to the Bill. It is because my hon. Friend the hon. Member for Ilford, South (Mr. Thorne) is with an IPU delegation in Uruguay. He sends his apologies for not being able to be here. I shall say nothing more about the Bill because it has been debated in both Houses and in Committee.

Mr. Michael Neubert: I am pleased to have this early opportunity to speak, on our first day back after the long summer recess. It is seven and a half years since I spoke from the Back Benches; for a great deal of that time I was a Government Whip and was therefore not able to speak in the Chamber at all, other than to move procedural motions. To my surprise and disappointment, I found that such motions are not the stuff of tomorrow's headlines. After my being consigned to silence for so long, I know that my constituents will be reassured to hear me more often in future and to know that I am alive and well and working on their behalf at Westminster.
When I was at the Ministry of Defence I had the occasional opportunity to speak and to appear on the parliamentary peep show and, through the merciless medium of television, I sometimes appeared in every living room in the land. However, on private business the same Trappist vow of silence descends on Ministers, leaving them inert and mute, even though the business may affect one's own constituents. The disability is that much greater when the title of the Bill does not immediately reveal the reasons for one's presence. Colleagues who saw me sitting silently during earlier debates on the Bill may have assumed that I was overcome by momentary tiredness or that during the long hot summer I was taking advantage of the air conditioning in the Chamber, seeing no connection between me and the Redbridge Bill.
Hon. Members who have taken part in the debates know that the Bill should be called the Romford (Extinguishment of Centuries-old Exclusive Royal Market Franchise) Bill. If that were its title, my interest in it and opposition to it would be apparent to everyone. I am sorry that my hon. Friend the Member for Ilford, South (Mr. Thorne), the promoter of the Bill, is not here, but I am glad that he was able to persuade his next-door colleague, my hon. Friend the Member for Ilford, North (Mr. Bendall) to speak on his behalf. We regret his absence, but understand that South American affairs have called him away from the Chamber. Even at this late stage in proceedings on the Bill I am glad to have this opportunity to speak, even if only in relation to clause 6.
I express my warm gratitude to my fellow Members for the London borough of Havering—my hon. Friends the Members for Hornchurch (Mr. Squire) and for Upminster (Sir N. Bonsor). They ably sustained the heat and burden of battle on many occasions without any direct assistance from the Member for Romford in whose constituency the

charter market stands. I felt as guilty as any first world war general, quaffing claret in comfort behind the lines while sending other officers to face the flak at the front.
I am indebted to my Havering colleagues for all that they have done on behalf of my constituents, and theirs, while I sat through the proceedings unable to contribute to the debate. My hon. Friends have distinguished themselves by what they have achieved, because the Bill is now very different from the one that was introduced to the House about two years ago.
We are considering yet another amendment, this time from the Lords. No doubt it responds to the strength of the arguments deployed at an earlier stage and not simply to arguments deployed in the other House alone. My hon. Friends' efforts deserved a wider audience, but it is in the nature of things that there has been limited participation in the debate and, not surprisingly, at times the debate degenerated into a dispute between neighbours, the Members for Redbridge on one side and the three Havering Members on the other. As we all know from our surgeries, disputes between neighbours are sometimes the most intractable issues with which we have to deal.

Mr. Robin Squire: My hon. Friend has mentioned several hon. Members. I hope that he will not overlook the noble contribution by our hon. Friend the Member for Maidstone (Miss Widdecombe), whose sterling speech highlighted some of the problems with clause 6. No doubt in due course we shall come to those and it would be unfair not to recognise that contribution.

Mr. Neubert: I am glad to record my gratitude to my hon. Friend the Member for Maidstone (Miss Widdecombe), who, on a memorable evening, contributed to a discussion on clause 6, which comes before us now as a result of the Lords amendment. I am sure that she wishes us well in our opposition to the Bill, because she is one of many hon. Members who have charter markets in their constituencies and who will see them threatened by the Bill.
The original Bill contained just two pages and its substance was contained in only one. It included clause 6 about the transfer of rights, but did not have the last two lines that are now contained in the clause:
provided that no such transfer or disposal or rights shall take effect without the consent in writing of the council.
After amendment, the Bill now covers the best part of four pages. The major additions to its length are the revised proposals for compensation.
The concern that this question aroused in the Chamber and in Committee underlines the seriousness of the main purpose of the measure, which is to remove an advantage conferred on Romford by royal charter by Henry III in 1247. That royal charter predates our Parliament and it has been a major factor in the prosperity of Romford and the London borough of which it has been part for the past 25 years. It is ironic that, after seven and a half years. I should find myself speaking for the first time in defence of a royal franchise, which has benefited the people of Romford for seven and a half centuries.
I am not a Conservative for nothing; I wish to conserve the best of our traditions and institutions until persuaded that there are good reasons for not doing so. The Bill does not constitute such a reason. The rights to which clause 6 refers are not related to the right to hold an open-air market in the borough of Redbridge. Redbridge is an extensive and highly desirable area of north-east London


and is represented in the House by three assiduous and active Members. It is unacceptable for it not to be also adorned by a lively open-air market where customers can enjoy the cut and thrust of the stallholders' repartee while looking for a bargain among the cauliflowers and cucumbers.
It would indeed be unneighbourly of the next-door London borough of Havering to object to and place an obstacle in the way of such a market anywhere in Redbridge. That is not the case. Many residents of Redbridge widen their consumer choice by patronising the market at Romford, which has a long-standing and deserved reputation for good prices and value for money.
The Bill would establish a new market in Ilford, within the six and two thirds miles radius of Romford market, which, for no fewer than 743 years, has been the subject of an exclusive royal franchise. Some have suggested that the whole concept of a charter market with a radius of six and two thirds miles is unbelievably archaic—a description given by an eminent legal luminary. However, it does not lack all sense or relevance to today's trading conditions.
The distance was decided on the basis that that was as far as a man could drive his cattle and back again in a day, allowing sufficient time in between for him to conduct his business and pursue his livelihood. Allowing markets within shorter distances of each other would have undermined the viability of the markets and the individual livelihoods of their traders because it would have diluted the spending power of those attending them. There are no longer any cattle at Romford market, and the straight high road from London, which used to pass through the market, has been bypassed with a ring road. The market is now a pedestrian precinct where shoppers can walk without risk, other than that of occasionally slipping on a cabbage stalk or, for politicians, a banana skin.
The old style of the market is not really that long in the past. I first visited Romford when I was a small boy. My grandmother took me there on the top of a bus, and the market still had cattle and other livestock. Romford was still part of the rural county of Essex; now it is part of metropolitan London, having been swallowed by the metropolis 25 years ago. Cattle were last sold at the market in 1959, only slightly more than 30 years ago, so it is not as archaic as might be thought.

Mr. William O'Brien: The location of the proposed market was an important point of debate on Third Reading. Labour Members were concerned that there was no plan identifying its proposed site. Some of us were under the impression that the market would be part of a larger commercial development in the area, rather than a market in the general terms that most of us understand. That matter caused a great deal of concern, and I hope that the hon. Gentleman will comment on it.

Madam Deputy Speaker (Miss Betty Boothroyd): I regret that I cannot allow the hon. Member for Romford (Mr. Neubert) to answer that point. As he said at the beginning of his remarks, we are debating a narrow procedural motion, and we must deal with the matter before us.

Mr. Neubert: I hear your guiding words, Madam Deputy Speaker, and, as ever, will seek to observe them. Of course, we are discussing not simply whether we should consider clause 6, but presumably—

Madam Deputy Speaker: Order. We are considering whether we should debate the Lords amendment. It is a narrow procedural motion.

Mr. Neubert: For the reasons that I have already given, I shall seek to argue that we should defer consideration for six months. That will require a certain amount of attention to the wider case, not simply clause 6.

Madam Deputy Speaker: Order. That would require a great deal of ingenuity, but I know that the hon. Gentleman has that. I shall be as tolerant as possible.

Mr. Neubert: I am indebted to you, Madam Deputy Speaker. I cannot respond to the hon. Member for Normanton (Mr. O'Brien), but I was present during all the previous proceedings, and I recall the occasion that he mentioned.
The rights enshrined in clause 6 relate to the establishment of a market in Ilford, which is in a part of Redbridge that comes within six and two thirds miles of Romford market, a distance thought to be archaic. However, under clause 6, Redbridge council wants not only to establish such a right against the long-standing claim of common law that ensures a safeguard for Romford market, but to transfer that right to others.
It might have been helpful if my hon. Friend the Member for Ilford, North had explained the background to the Lords amendment. It is not clear to me, or to the advisers from the London borough of Havering, why we are even considering it. We can only speculate, as I intend to do during my speech. The clause states:
any person entitled or authorised by virtue of this Act to hold a market may transfer or dispose of all or part of his rights to another.
We need to examine not only the justification for whether we should tonight debate clause 6, but whether the privilege obtained by private Acts of Parliament should be for the benefit of others, and whether that is the right way to proceed.
It is a matter of some pain to me that the Bill has proceeded this far only through the support of Conservative colleagues. Members of Parliament have many calls upon their time and it is understandable that they may not always be as familiar as the sponsors with the issues involved in a private Bill. One reason for deferring consideration of clause 6 for another six months is to enable more hon. Members to attend the debate than the relatively few who are here tonight.
I have already mentioned the confusion caused by the title of the Bill, in which the removal of a franchise—a negative outcome—is revealed only upon closer examination. It suggests the positive purpose of establishing a new market. Nothing is more likely to enthuse a modern Conservative than the mention of the word "market", but "franchise" is an equally respectable commercial concept and, in effect, the royal charter granted to Havering all those hundreds of years ago is just that.
What sort of market are we dealing with? Its rights are to be transferred to others under clause 6. It is not just a single site, but part of a wider market economy. The


relatively few colleagues who have voted for the Bill to date may think that the rights to which the clause refers extend the free market and increase fair competition, but do they realise that they are conferring rights on the new market similar to those that Romford has enjoyed for so many years? That is hardly progress. If we were to move on to considering the clause, and if we rejected the Lords amendment, as I understand it, that protection could be transferred to a third party—not the local authority or some other representative of public interest, but to anyone who might take over the ownership perhaps, or certainly the operation, of the market. Of course, I read the clause as a layman and without any advice from the promoters.
It is likely and, again, understandable that some of my colleagues may have assumed that because the London borough of Redbridge has repeatedly had the good sense to elect a Conservative majority to its council, any private Bill promoted in its name must, by definition, be a good thing that deserves support without question. I have been a leader of a London borough council—before coming to Westminster, I was mayor of Bromley. I have a high regard for the benefits of Tory local council administration.
However, I would not suggest that on every occasion, and on every issue, a Tory town hall administration is necessarily infallible. Perhaps I may derive some support for at least that assertion from Opposition Members. I hope that the fact that the Bill has been vigorously opposed by other Conservative Members—12 heroes voted against it on Second Reading—will be enough to raise doubts in the minds of other of my right hon. and hon. Friends about the advisability of accepting too readily the Bill's virtues and granting the powers and privileges that it seeks to establish.
Some of those privileges to be found in clause 6 would be capable of being transferred to another party. Although the Bill has received some support in this House, it has never received the support of the full Redbridge council. Before considering whether we should debate the Bill further, there are questions to be raised about the aspect. Opposition to the Bill by Havering council has been not only overwhelming but all-party.

Mr. Squire: My hon. Friend mentioned that 12 of our right hon. and hon. Friends opposed the measure. No doubt he will mention also the germane point that no fewer than 30 colleagues supported an amendment to delete a little piece of clause 6. When one considers that about 100 right hon. and hon. Members were present for that debate, it is obvious that there is scope for a larger number of them to examine clause 6 in its entirety.

Mr. Neubert: I am indebted to my hon. Friend for his intervention. The question whether we should give the Bill further consideration without interruption relates to my point concerning the support that the Bill received before it was promoted. My advice is that, for such a Bill to be promoted in Parliament, it must receive a minimum level of support from the local authority in question, as expressed by a vote in council for the Bill to proceed. My information is that that level of support was exceeded in Redbridge council by only one vote.
Local elections were held in May. It would be interesting to know whether that narrow margin of necessary support for the Bill survived the changes of councillors that occurred in those elections. Perhaps my

hon. Friend the Member for Ilford, North can say whether the council has been consulted about the promotion of the Bill since the May elections. One also wonders whether the council has been consulted about the Lords amendment and the attitude that should be adopted towards it. We have received no advice from the promoters on whether the Bill still has the council's support. We should know the answer to those questions before we consider the deletion or otherwise of clause 6.

Sir Nicholas Bonsor: On a point of order, Madam Deputy Speaker. In view of the comments of my hon. Friend the Member for Romford (Mr. Neubert), perhaps we should seek the guidance of the Chair on whether it would be right to proceed with the Bill if it no longer has the majority support of Redbridge council.

Madam Deputy Speaker: That is a matter for debate, and there is no reason why the debate should not continue.

Sir Nicholas Bonsor: Further to that point of order, Madam Deputy Speaker. My understanding is that, if we pass the Bill today, there is no further step the House can take to stop or reverse its progress. If it would be unlawful in procedural terms for the Bill to be promoted without its having the majority support of Redbridge council, surely we should not proceed with it tonight.

Madam Deputy Speaker: The House must decide, at the end of this debate, whether or not to proceed with the Bill.

Mr. Neubert: If that is so, perhaps I am wrong in thinking that a council must have the support of its own members for a Bill before it can be promoted. It may be that, having once made the decision to promote a Bill, no further reconsideration is needed in altered circumstances. Nevertheless, it is unusual for a Bill to take two calendar years to get under way. The original Bill was printed on 16 November 1988. It is feasible that the newly elected council does not support the Bill by the majority needed for it to be promoted. That is relevant when we are considering whether we should continue to consider it in this House. We must question whether it has the necessary legal and statutory support from the promoting local authority. I cannot answer my own question on my feet, but we owe it to the House to give that aspect some thought before reaching a decision on the motion.
It may appear at face value that the Bill has received the support of Conservatives both at a local level and to a limited extent in Westminster. The matter is less clear-cut than it appears. Line 13 of clause 6 makes reference to section 50 of the 1984 Act, which in turn refers to the Food Act 1984. That legislation, enacted by a Conservative Government, left intact the rule that a franchise market is protected against any rival market within six and two thirds miles, and that a statutory market is protected within six and two thirds miles of any rival other than another statutory market.
If we reject the motion and move to consideration of clause 6 and it is passed, and if the Bill is passed with or without clause 6, Redbridge will enjoy protection against another market being established in the borough. Such protection is of very real commercial value and would be an important consideration in any arrangement to transfer the rights with which clause 6 deals. As the relevant legislation is so recent, having been enacted only six years ago, it follows that a number of right hon. and hon. Members—at least on these Benches—who supported the


Bill in the belief that it would in a small way create a free market would have certainly voted for the 1984 Act that embodies the protection that Redbridge will to a large part enjoy under the Bill. Alternatively, they may argue that in this respect they are being consistent. If so, why do those same Members of Parliament not respect Romford's long-held common law rights? Why favour Redbridge over Romford and at Romford's expense?
On Second Reading, the Bill as then drafted would have given Redbridge protection within the same six and two thirds miles' distance as has been attacked as anachronistic in the case of Romford. Subsequently, the Bill was substantially amended in Committee. The Lords amendment is only the latest in a number of amendments to ensure that the protection was limited to the area of the London borough of Redbridge only, which is less than six and two thirds miles distance from Ilford in the round. Nevertheless, an inconsistency remains—and to vote for the Bill and for the proceedings to continue would be a vote for statutory protection, not for a free market.
The reference in clause 6 to section 50 of the 1984 Act is consistent with clause 5, which states:
A market established under this Act shall be deemed to have been established by the Council under section 50 of the Act of 1984.
It is not clear why clause 6 was inserted in the Bill and subsequently amended, or why it is now proposed that it should be deleted at this late stage, on the Bill's return from another place. It is not clear either why we are being asked to give further time to its consideration.
What place does such a clause have in such a Bill? It has already been amended, and it is now proposed to delete it from the Bill. I am open to correction, but I have received nothing in my post from the promoters to explain that surprising turnabout.

Mr. Squire: Nor I.

Mr. Neubert: Apparently, my hon. Friend has received no such communication either. At a very late stage the Bill appears back in the House with a proposal that this clause should be deleted.

Mr. Squire: On a point of order, Madam Deputy Speaker. My hon. Friend has reminded me—I had not fully considered it—that to my knowledge, and obviously to yours, promoters of private Bills are required to notify hon. Members on either side of the House of details of the arguments for the Bill at each stage that the matter is debated in the Chamber. Echoing my hon. Friend's remarks, I have received nothing from the promoters of the Bill about this evening's debate. I wonder whether that is in order, or whether some breach of private Bill procedure has taken place which would negate our proceedings tonight?

Madam Deputy Speaker: As far as I am aware there has been no breach of private Bill procedure. Of course it is usual for promoters to provide as much information as possible, but I assure the hon. Gentleman and the House that there has been no breach of our procedures in this matter.

Mr. Neubert: I am reassured by what you say, Madam Deputy Speaker. I was questioning why there should be

such a clause in the Bill in the first place, so that I should have some inkling of why it should be removed. To answer those questions I sought advice from the borough secretary and solicitor, Mr. Michael Tink, who has been handling Havering's case against the Bill. I refer to his letter of 21 September on this matter, which confirms the lack of information that seems to be common to my colleagues and myself, as far as Havering council is concerned.
Mr. Tink says:
It may sound odd to say after all the attention given to this Bill that we cannot give a precise account of the reasoning for the amendment which now prompts the return of the Bill to the Commons
and which gives occasion for this procedural motion tonight. He goes on to say that he had
no communication from the promoters but the amendment"—
as we know—
is for the deletion of the whole of clause 6 of the Bill.
He thinks that that may spring from arguments that he and others made before the Committee in the House of Lords, but he believes that the Committee did not recommend the amendment and that the Third Reading in the Lords was without debate.
The background to the matter was that Redbridge was apparently seeking in the Lords to counter the argument that it is wrong in principle to use piecemeal local legislation for overcoming limitations in the general law—something which my colleagues and other hon. Members believe in very strongly and which we urge upon the Government, represented by the Under-Secretary of State for the Environment tonight. We think that that is a fair argument, and I may return to it later.
Redbridge's case was that local authorities throughout the country operate statutory markets under section 50 of the Food Act 1984, including Havering with the Friday market at Romford.
Redbridge wants to run a market under those powers and wants to site it at Ilford. Powers under the Food Act cannot be used to interfere with common law market rights in the area without consent. The Wednesday and Saturday markets at Romford are common law markets and their protection extends to the Ilford area. Therefore, Redbridge needed the Bill to overcome the effects of those rights and to allow it to use the powers granted by the Food Act without Havering's consent.
Redbridge has never sought Havering's consent. That is relevant to this motion. We might not be here tonight and we might not need to consider the motion if Redbridge had sought Havering's consent. From the outset, Redbridge has acted on the assumption that it would promote a Bill in Parliament rather than seek a licence. That is unfortunate because the Bill embodies the sort of compensation which as a licence fee might—I stress the word "might"—have interested Havering, and the House might have been spared hours spent on private legislation and any future hours we may spend debating clause 6 if we agree to do so tonight, or in debating the motion if we continue to do so.
I shall offer some evidence to the House to support my assertion. It comes from Committee proceedings last year, which show how long this unhappy Bill has been proceeding. I was supplied with some of the relevant Committee proceedings. I suggest that, rather than go on to consider clause 6 and give up further valuable parliamentary time, by not agreeing with the motion we


might call upon Redbridge to consider opening negotiations with the London borough of Havering at this late stage, which would avoid the necessity of promoting the Bill. There appears to be no end to it.
Is the licensed approach feasible? I have relevant extracts from Committee. If any members of the Committee are present in the House they may recall that on the first day in Committee Mr. J. Hawkins was giving evidence. He was asked:
In July 1986 did the Council by its Environmental Health (Urgent Action) Sub-Committee agree that, subject to consideration of a report on the establishment of a market dealing with legal considerations and so on, it was prepared to consider the establishment of a market in the Borough under the powers contained in Section 50 of the Food Act?
The answer was, "Yes." Later, he was asked:
Was it resolved that the officers should carry out a further study of the implications of pursuing private legislation and to report back?
The answer was, "Yes."
The questioning continued:
On 13 April 1988, did the General Services Committee authorise the officers to proceed with the promotion of Private legislation for the provision of a permanent market site in Ilford and to engage consultants?
Mr. Hawkins answered:
They made that recommendation, yes.
I stress the date—13 April 1988—as it is two and a half years since the general services committee of Redbridge council authorised the officers to proceed, which adds weight to my suggestion that it might be time, if the opportunity has not already been taken, for Redbridge council to be consulted again about whether it wishes to proceed. The circumstances may have greatly changed.

Mr. Squire: A major change since then, as my hon. Friend will confirm, is the arrival of the unified business rate, which must have had a major impact in Ilford, knowing the impact that it has had in Romford. Surely that is a factor which the council should have taken into account?

Madam Deputy Speaker: Order. It may well be a major factor, but it is not relevant to the question before us.

Mr. Neubert: To support my contention that at no time did Redbridge seek consent from Havering, as is allowed under common law and under statute law, I again refer to the Committee report on page 46, when Mr. J. Hawkins is being questioned. He was asked whether, about a week after the meeting of the general services committee to which I referred, there was a
without prejudice meeting between the director of administration and legal services and the solicitor to the Havering London Borough Council.
The answer was, "Yes."
It was only after all those decisions to promote the Bill had been taken by the council that it finally approached Havering. Presumably it did so out of courtesy and a desire to inform it of the proceedings, but without any intention of negotiating and avoiding the necessity of a private Bill which would use valuable private Bill time in the House.
Hon. Members may think that perhaps it was not feasible for Redbridge to seek such consent. Perhaps Havering's past record went against it. That is certainly not so, because Mr. Tink also gives evidence about Kingston upon Thames, which is another example of a franchise market where such a license was sought and granted. There are hundreds of such markets and there may be other examples. In those circumstances it would be

easy for Redbridge to make a similar diplomatic approach to the London borough of Havering, seeking its consent to have such a market within the six and two thirds miles' radius on the grant of a licence and on payment of the licence fee.
Before we consider debating the Bill further, we should understand that there is an example in Kingston upon Thames. On page 38, Michael Tink, giving evidence to a Committee of this House, answered the question:
Do you know, by way of example, of any other authority that has been prepared to grant a licence on proper terms in relation to its market rights?",
with:
Yes, sir, I do. I have caused inquiries to be made, and I know that the Royal Borough of Kingston upon Thames does grant licences for, I believe, four or five rival markets, one of them in the London Borough of Sutton, one at Wimbledon Stadium. I am told there is another one in Kingston town centre itself, which operates on some sort of licence; one at Kempton Race Course and one at Merton. I believe there was formerly one at Putney which has now ceased.
It is perfectly feasible for Redbridge to negotiate with Havering, without our giving further time to considering the Bill in this House as we approach the end of the Session. I cannot guarantee a favourable outcome, but we should certainly consider that option before debating clause 6 and agreeing to the amendment. If the amendment is rejected, I imagine that the same applies to private legislation as to Government legislation, and that the Bill will have to go back to their Lordships who will have to consider the views of this House. Therefore, even if we reach a decision here tonight, it will not necessarily be the end of the matter.
The licence might be related to compensation. As a result of the decision of the Committee of this House, Redbridge would be required to pay compensation to Havering for the loss of commercial value to its market by the establishment of a market within six and two thirds miles of Romford. That has been put at 10 per cent. of the operating profit of the new market when it is established. I have no idea what sum that might be, but it might be the same as a licence fee negotiated directly between the two councils, without promoting a Bill or creating the precedents which threaten other markets, of which there are several hundreds. Indeed, there is a whole network of such markets.
The question of such a licence was raised. At no time has Redbridge followed that path, although it might well have done. On page 18, the aforementioned Mr. J. Hawkins, a witness for Redbridge, was asked:
Do you know whether the London Borough of Redbridge has ever applied to Havering for a licence to operate a market within Havering's protected area?
He answered:
I am not aware that there has been such an approach.
That confirms that there was not such an approach and that, instead, the House has been asked to spend considerable time examining the Bill with all its shortcomings and defects and despite its lack of popular support. That is the result of Redbridge's unwillingness to negotiate. We are again asked to give time to explore the reasons for deleting clause 6, without having been told those reasons in advance of tonight's debate.
Counsel examined Mr. Hawkins about the licence and asked:
Can we explore, nevertheless, some of what the basic terms of such a licence might be? Firstly, provision would be made, would it not, for which days of the week the licensed market was to be permitted to operate, do you agree?


The answer was, "Yes."
Secondly, and importantly, provision would be made for the duration of the relevant licence?
The answer was, "Yes, it could be." Counsel asked:
You could have provision for a fixed term, or you could have provision for a term capable of being brought to an end by either side by notice, could you not?
The answer was, "Yes."
In either event, the duration would be limited?
The answer was:
That is a possible approach, yes.
The examination continued:
Thirdly, and importantly, there would be the amount of the fee to be paid by the licence-holder?
The answer was, "There would be, yes", to which counsel asked:
Which you accept might be geared to the profit made by the licensee in operating his market?
7.45 pm
That is relevant because it is exactly the conclusion that the Committee reached, which persuaded it to require the promoters to add such an amendment to the Bill. The answer was:
That could be the approach of the franchise-holder, yes. What the reaction from the person seeking the licence would be, of course, is another matter.
Counsel continued:
If that were the approach, is there any reason why a percentage should, in your view, be fixed at any particular figure—the percentage of the profit made by the licence operator?
The answer was:
If this was the approach that was being accepted on both sides, then yes, there could be negotiation on any figure.
In other words, it was open to Redbridge and Havering to negotiate a licence fee which would enable Ilford to realise its ambition to have such a market, without affecting the 750 years' franchise conferred by Henry III on Romford market. Counsel said:
Thank you. That was going to be the next point I was going to put to you. It would be the result, would it not, of a bargain between a willing seller and a willing buyer, or to be more precise, a willing licensor and a willing licensee?
The answer was, "Yes."
I raise that at length at this stage because it is still possible for proceedings on the Bill to be adjourned to enable the neighbouring local authorities to get together and negotiate a reasonable arrangement. It probably would not cost Redbridge more than it would cost in the amendment to the Bill, because it has already agreed to a substantial 10 per cent. of the operating profit of the market going to Havering in compensation. That might be held to be a reasonable amount for Havering to ask as a licence fee. I have no brief to speak for Havering council and I cannot anticipate what its answer would be, but I am sure that it would wish the precedents created in the Bill not to be established, if there were an avoidable way out, such as the negotiation of a licence for a fee.
Counsel continued:
It is right, is it not, that while such licence continued, the licensor could not be in any position to complain that the licensee's market was causing him any damage, could he?
The answer was:
No. Subject to the terms of the licence, I am sure that would be right, yes.
In other words, once Havering had agreed to such an arrangement without the Bill, it could not complain. It

would be getting its licence fee. That is what happens between markets in Kingston upon Thames and no doubt elsewhere.
It occurred to Mr. Tink, the borough secretary and solicitor, that clause 6 was not related to any restriction arising from Romford's market rights. He concluded:
if Clause 6 was necessary at all then it must have been intended to give Redbridge different (and better) powers than those available under the Food Act to any other Local Authority.
Hon. Members might well be surprised if that were the case. Clause 6 would certainly be objectionable, if we were told that Redbridge were underprivileged and Romford sought a great advantage. If it were known that originally Redbridge were promoting a Bill to give itself greater advantage than Romford and countless other charter markets, many hon. Members might have taken a different view from the start.
The amendment seems to vindicate Havering's argument that clause 6 is either unnecessary or contrary to the case being made for the Bill. It is surprising that Havering has had no communication with the promoters on that point.

Sir Nicholas Bonsor: Am I right in thinking that this question was revealed in Committee and that Havering made the points that my hon. Friend is now making but that those representing Redbridge made no attempt to answer them? Therefore, the House has had no guidance from the promoters of the Bill on why they sought to put the clause in, just as we have had no further guidance on why they now wish to remove it.

Mr. Neubert: In general, that must be so. It is not that there has been insufficient time for them to do so. The Committee considered the Bill in the previous Session of Parliament well before the summer recess last year. Therefore, there has been ample time for an explanation to be given.
Redbridge's parliamentary agents are Sharpe Pritchard, who are well known to hon. Members. Their no doubt expensive services enjoy a high reputation in the House. Proceedings on the Bill have been under way for nearly two years if one dates them from the printing of the Bill on 16 November 1988. Redbridge residents must have been paying a packet all this time. The Bill has been controversial from the start, even if the extinguishing of a royal charter does not, to my regret, count as lèse-majesty. It has undergone substantial amendment, of which the Lords amendment is yet another example.
Proceedings have been protracted and have detained the House for an avoidable length of time. I am now detaining the House for an avoidable length of time and I ask for forbearance and understanding. The proceedings have played a part in putting pressure on the Leader of the House to change the private Bill procedure which will restrict our freedom and the rights of hon. Members to play their traditional role in such proceedings. All that has happened despite the fact that on Third Reading the Bill had a majority of only five. That is a narrow squeak in anybody's estimation.
As I understand it, if we were to disagree with the Lords amendment, it would return to the upper House. The Bill has survived this far only because the Government introduced a carry-over motion from the last Session to this. We are now coming towards the end of the second Session. I do not know whether it is possible for a private


Bill to be carried over a second time. It is my understanding that, if a private Bill does not secure enough support to pass through all its stages in one Session, it would go against the principle of private Bills for it to proceed at all. It would go against that understanding if it were to be carried over yet again. As I have said, there is no doubt that it has played its part in putting pressure on the Government and the Leader of the House to change private Bill procedure and I regret that.
Before the House reaches a decision, I ask again whether it would be wiser for Redbridge to withdraw the Bill. The expense does not stop at Queen Anne's Chambers. Redbridge is also being advised by a well-known firm of public relations consultants. I have no hard words to say against the company concerned. It does an excellent job and has even been shrewd enough on occasion to offer me hospitality at its offices not 100 miles from here.
The only other person I know who lives in that street is my hon. Friend the Member for Watford (Mr. Garel-Jones), the Minister of State, Foreign and Commonwealth Office. Incidentally, he should take a close interest in the Bill, as he is one of the many hon. Members who has a charter market in his constituency which would be threatened by the precedent set by the Bill.
The fact that my hon. Friend the Member for Watford lives in that street suggests the quality of the firm of consultants and I am sure it does not come cheap. It has been said—it has not been denied so far—that the consultants are being paid £50,000 plus £4,000 a month for expenses. Some of that money might, with advantage, have been spent on explaining to hon. Members the reasons for the to-ing and fro-ing on clause 6. We would all benefit from that, including the Chairman of Ways and Means who is responsible for private legislation in the House. He may regret as much as we do that we have no clear understanding of why we are at this unusual stage in private Bill procedure.
This legislation has very little support in the House—it was carried on Third Reading by 48 votes to 43—and I am distressed at the amount it must be costing the community charge payers of Redbridge with each week that passes.
It may be that clause 6 relates to the original clause 3. That clause as printed in the Bill of 16 November 1988, said that the council may
(1) establish a market within a distance of one mile from the town hall, and
(2) authorise on such terms, (whether financial or otherwise) as they think fit, the establishment by others of a market within a distance of one mile from the town hall.
The second option might have entailed the transfer of rights as set out in clause 6. However, clause 3(2) has now been removed from the Bill, and, as a result, clause 6 may be redundant. I await an explanation. As I said earlier, I am a layman in these matters. I do not know precisely the reason why the promoters want to remove clause 6 and I cannot deduce from the wording of the clause why it is no longer appropriate. However, Havering made some play of arguing against the clause in their Lordships' House and it may be that this is a concession to those arguments.
It is clear that by the inclusion of clause 6 Redbridge had ambitions beyond what is necessary for a local authority to own and operate a market. That brings me back to my objection in principle to the clause and my

main argument for wishing to see my motion carried. They should have an opportunity for second, third or even fourth thoughts.
Throughout the country, there are many markets such as that in Romford. The figure of 284 has been cited, but I am not sure whether that represents the number of markets nationwide or whether it is the number of hon. Members whose constituents have access to such a market. A list has been circulated to some hon. Members by the National Market Traders Federation and it lists 284 hon. Members as having such a charter market. It is disappointing that so few of them seem to be aware of the issues in the Bill which, although it affects my constituency of Romford and is promoted by Redbridge, has implications for charter markets all over the country.
The network of markets has developed over hundreds of years and has provided the basis for local prosperity in many towns, especially mine. Romford is famous for its market. It is not famous for much else. It is not famous for its Member of Parliament and it no longer has a football club. It has an excellent brewery which promotes John Bull bitter, but only within the London Weekend Television area. It may be that some towns in this country have developed and been sustained solely as a result of their having a market. If the market is to have its charter removed by a private Act of Parliament, it may be that not only Romford but many other markets will be threatened and picked off one by one.
My hon. Friend the Minister is very patient to sit through the proceedings. His predecessor said on Second Reading that the House should be given an opportunity to examine the Bill although the Government have not supported it. However, they should have taken more interest in the motion to defer consideration. In fact, I would welcome a contribution from my hon. Friend the Minister on whether we should proceed or whether we should do as the motion suggests and defer consideration for six months.

Sir Nicholas Bonsor: On the Government's attitude, the House should take note of what Lord Davidson said in the other place:
We have reviewed the whole matter of charter market rights to consider whether they are a restraint on trade. We found this a highly complex matter, which could involve compensation for loss of rights and which might well be expensive … As existing franchise rights present little impediment to trade—market trading being such a very small part of UK retail trade—we should leave matters as they stand at present."—[Official Report, House of Lords, 5 April 1990; Vol. 517, c. 1612.]
Although I am sure that the Government do not wish to intervene on the Bill, that sentiment implies that matters should be left as they stood in Romford as well as in the rest of the country.

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Mr. Neubert: I am ready to agree with my hon. Friend, because with his unerring instinct for what is apt, he has anticipated my next point. The Government came clean in another place about their reasons for not proceeding with such legislation. It is a matter of complexity and compensation, and if the system is thought to be outdated—there is no doubt that in historical terms it is outdated, although it has some relevance to present day conditions—it would be better reformed outright, not by picking off one franchise market at a time by private Act of Parliament. Although they are a radical Administration,


the Government have not sought that reform, and I have no doubt that my noble friend Viscount Davidson had his finger on the point.
That confirms the value of such charters and that they should not be taken over and transferred to others, as anticipated in clause 6, without adequate recompense and without it being dealt with evenhandedly.

Mr. Peter L. Pike: Is not it true that many towns have grown around ancient charter markets and that in recent years authorities have put considerable investment into new market facilities? If such a Bill had been proposed at that time, they might not have made that investment.

Mr. Neubert: I am glad to have given way to the hon. Gentleman, who has sustained his interest throughout the long proceedings on this Bill; we have welcomed the value of his advice on more than one occasion. These arrangements are long established and will be upset by a Bill that picks off one market. The economy of Romford, which is prospering and supporting the livelihoods of many people in and around the town, is based on those long-standing arrangements, and simply changing them will have serious repercussions. The Committee that considered the Bill recognised that fact by requiring Redbridge to pay adequate compensation, but I do not know whether it is anything more a mitigating amendment. If we support the Bill, which attacks the long protected rights of a single market, we may condemn ourselves to endless such Bills, which is one of my greatest anxieties.
It cannot be right to proceed in this way and I hope that I have made it clear that the best for all concerned, even at this late stage and notwithstanding the expense incurred, the many hours of debate and discussion and the valued experience and knowledge that have been used to amend the Bill, would be to proceed by negotiation and to avoid putting this precedent on the statute book. It may be argued that there is already a precedent—the agreement reached by the borough of Bexley with Greenwich. It is not for me or other hon. Members to argue the case for Bexley or Greenwich, but, whatever their arguments or interests, they reached an agreement.
The Bill is not the subject of such an agreement—it would not need to be promoted in the House if there were such an agreement—but the result of Redbridge's single-minded determination to promote legislation as a way of achieving its objectives. For that reason, I support the motion to defer consideration because it gives Redbridge a chance to reconsider and to open negotiations with Havering and to explore whether there is another way out that does not require this precedent, which would be highly unfortunate for charter markets throughout the country and for Members of Parliament whose constituents enjoy the benefits of them. I very much hope that the motion will be carried.

Sir Nicholas Bonsor: I welcome my hon. Friend the Member for Romford (Mr. Neubert) back to the land of the living. As one of his colleagues in Havering, I have very much missed his presence on the Back Benches. I hope that he will not take it amiss when I say that it was a sadness to me that the Government did not dispense with his services a few months earlier, because had they done so I

have no doubt that the Bill would not have reached this stage. With my hon. Friend's assistance, which he was debarred from giving, we would have managed to knock this absurd Bill on the head long ago.
Hon. Members, including my hon. Friend the Member for Romford, have sat through many nights of discussion on the Bill. We thought that we had exhaustively dealt with all the subjects that could have been brought before us, but it appears that we had not because the amendment radically transforms the nature of the Bill in such a way that it would be wrong for the House to consider it tonight.
No warning was given to Havering council as far as I am aware, and certainly to my hon. Friends or me, that the amendment would be moved. There was no discussion and it was unilaterally decided by Redbridge council to delete this clause lock stock and barrel fromn the Bill. I am not clear—I hope that my hon. Friend the Member for Ilford, North (Mr. Bendall) will intervene and enlighten me—what are the consequences of the clause's removal. I shall read clause 6 as it was—

Madam Deputy Speaker: Order. We are not yet dealing with the amendment to the Bill. The question before us is whether we move on to deal with the amendment.

Sir Nicholas Bonsor: That is right, but we cannot decide whether we should debate the amendment without considering the consequences of removing clause 6. I shall refresh the memory of the House and read that clause. It says:
Any person entitled or authorised by virtue of this Act to hold a market may transfer or dispose of all or part of his rights to another and that other shall have and may exercise, to the extent authorised by the Council, all or any of the powers that the Council have in relation to markets established by them under Section 50 of the Act of 1984, other than any powers to make byelaws, but shall be subject to all the restrictions, liabilities and obligations in respect thereof to which the Council are subject.
How can the House assess what the result will be of removing the clause from the Bill without considering the amendment? I disclose my ignorance by saying so, but I cannot understand what the position will be if the Bill is passed without clause 6. I hope that my hon. Friend the Member for Ilford, North will enlighten me, but if he cannot the House cannot conceivably consider whether the clause should be deleted.

Mr. Neubert: I had hoped, as no doubt my hon. Friend had, that we would have an explanation, not, as appears likely, at the end of the debate but at an early stage. It would have been helpful for an explanation to have been given so that I could have considered it. If we are not to have an explanation until the end of the debate, it will make a farce of it.

Sir Nicholas Bonsor: Or, indeed, if we are not to have an explanation at all. As you, Madam Deputy Speaker, may have noted. I hesitated before rising, because I wished to give my hon. Friend the Member for Ilford, North an opportunity to clarify the points raised by my hon. Friend the Member for Romford. It is most unsatisfactory if those of us who criticise the Bill and who wish the motion to be carried are not to be given the advantage of knowing precisely what we are discussing.
I have scrutinised the rest of the Bill in an attempt to discover what the consequence of omitting clause 6 would be. I see that my hon. Friend the Member for Ilford, North is talking to some of my hon. Friends. I hope that he will


pay attention, because if he does not, he will not be able to answer the questions that I am putting to him. I hope that my hon. Friend will be able to tell us whether the council will authorise the transfer of stalls if there is no clause 6 and on what terms the transfer of rights in each stall will be made. Will the council have a blanket right to allow transfer by whatever means it wishes, or will it have no rights to authorise a transfer at all?
As far as I can see, nothing elsewhere in the Bill either grants or limits the power of transfer. Clause 3 deals with the establishment of the market. Clause 4 deals with the compensation payable in the event of the Bill being enacted and clause 5 merely specifies that section 50 of the 1984 Act shall apply to the Bill.

Mr. O'Brien: I consider this to be a very important matter. I have examined the proceedings in the other place and in Committee. Nowhere was any evidence given to support the case for the removal of the clause. Until the facts are made available to the House, we cannot proceed, and we should therefore support the motion. Does the hon. Member for Upminster (Sir N. Bonsor) have any information about the circumstances that gave rise to the tabling of the amendment?

Sir Nicholas Bonsor: I have no such information and I think it very unfortunate that I have none. As far as I am aware, no hon. Member—with the possible exception of my hon. Friend the Member for Ilford, North, has any such information. Indeed, I remain to be convinced that even my hon. Friend has such information. I deeply regret the fact that my hon. Friend the Member for Ilford, South (Mr. Thorne) cannot be here, although I understand the reasons. His absence handicaps those of us who seek a proper debate on an important part of the Bill. He is one of the two primary sponsors who have argued in favour of the Bill throughout our long proceedings on it, and it is regrettable that he cannot be here during its final stages.
I invite my my hon. Friend the Member for Ilford, North to enlighten the House, if he can, on the consequences of removing clause 6. Unfortunately, it seems that my hon. Friend cannot enlighten us, so let me speculate.
It is possible that if the clause is removed, the council will have no power to authorise the transfer of the trading stalls—in which case, I cannot see how it can proceed to set up and maintain a market in Ilford. Another possibility is that the council will have the power to authorise the transfer of the stalls without imposing any conditions on them. If that is so, I should be grateful for information about how that arrangement compares with arrangements for other markets where councils set up stalls.
Do the councils usually have the power to authorise transfer of stalls from one person to another without having any say in the type of business taking place at those stalls, or are restrictions perhaps imposed under section 50 of the 1984 Act? I do not think that it is incumbent on me to give the House the solutions. Those who are promoting the Bill and those who have brought it before us have a duty to tell us the consequences of accepting the amendment. At the moment, every hon. Member in the Chamber—and everyone who has considered the matter—is as much in the dark as I am.

Mr. Neubert: I find it quite intolerable that, even at the third or fourth time of asking, we are to be offered no explanation of the fact that we have been called here to

deal with this business tonight—even though it was known before the summer recess that this business would be taken. I have had to spend some time preparing for tonight's debate, in ignorance of the reasons for it but in the confident belief that the sponsor of the Bill would make it plain at the outset why we were being asked to consider the Lords amendment and what the background to it was. It makes a mockery of our proceedings if we are to be given no explanation at all of a matter that is clearly so directly relevant to the Bill.

Sir Nicholas Bonsor: I echo my hon. Friend's sentiments. It is an abuse of the procedures of the House if business is brought before it for which no explanation is offered. There has been no proper resistance to the motion and no proper explanation has been given of why those who tabled it may be mistaken.
While remaining neutral on the fundamental question whether Redbridge should be given the power in the Bill, the Government should certainly not be neutral when it comes to matters affecting the procedures of the House. They should not be neutral about the fact that the sponsors of the Bill have not informed the House of precisely what they are asking it to agree. As the hon. Member for Normanton (Mr. O'Brien) said, no explanation was given when the amendment was moved in the other place. Having resisted such an amendment throughout the Committee stage—without giving any reasons for resisting it—the promoter has suddenly decided to adopt such an amendment and to try to force it through both Houses of Parliament without even opening their mouths to defend what they are doing. That is something that the House simply cannot tolerate.
I regret the fact that so few hon. Members are present, although it is not surprising on the first day back after a long summer recess, and especially as the Bill is not perhaps the most important business with which we are likely to be faced in the next fortnight—except to my hon. Friends the Members for Romford and for Hornchurch (Mr. Squire) and myself. Our colleagues who are not present would not for one moment tolerate such a procedure and I predict that there will be a roar of fury when hon. Members read Hansard and see what is being done in their name and in their absence and without any explanation from the sponsors.
That is the first reason why I vigorously support the motion, tabled to try to defer discussion of the amendment so that proper consideration can be given to it, so that proper consultation can take place between Romford and Redbridge and so that my hon. Friends and I can be given a full explanation of the consequences of accepting the amendment and of the reasons why it has been tabled.
I touched upon my second reason for supporting the motion in my point of order. I am not clear whether the locus standi of the promoter is still intact. I do not know the procedures and rules of the House in relation to a Bill being proposed without having complied—at the time when it was proposed—with the qualifications laid down in "Erskine May" for the introduction of such a Bill.
Perhaps it is enough—as my hon. Friend the Member for Romford suggested—that the conditions were intact when the Bill was first proposed and perhaps it does not matter what happens thereafter. But perhaps by now—some two and a half years after the introduction of the Bill


—the qualifications allowing Redbridge to assert its right to introduce the Bill are no longer intact. If that is so, I do not know whether the Bill should be allowed to proceed.
If it should not be allowed to proceed, we should certainly not debate the amendment tonight. The debate should be adjourned and the matter should be considered further, perhaps by the occupant of the Chair, to determine whether the Bill still has proper standing to be considered in this place. That is a question of fundamental importance. There must be similar instances; indeed, I can think of one parallel straight away.
Suppose that a Government Bill is hybrid. As I understand it, a hybrid Bill cannot proceed through the House in the face of objection because it is not properly founded; it can be stopped. If my submission is right, the same rules should apply to this Bill. Unless the promoter can establish that the foundation on which the Bill has come to the Chamber is sound and intact, the Bill must fail. I must admit that I am not clear about what procedure should apply. If my supposition is correct, how can we stop the Bill at any time other than now? I am in your hands, Madam Deputy Speaker, although I am making a speech and not raising a point of order.

Madam Deputy Speaker: The hon. Gentleman raised the matter on a point of order earlier and I assured him then, as I do now, that the Bill is in perfect order, otherwise we would not be debating it tonight.

Sir Nicholas Bonsor: I accept that and I move my guard, as any good defensive boxer must when he has just been effectively punched.
The fact that the Bill is in order does not mean that the House should consider these matters without having been given prior notice that the change was to be made to the Bill. Even though it is in order for Redbridge to bring forward the Bill, the council may no longer have the requisite support for it, because it might have changed its complexion and many no longer support the Bill. It would be an insult for the new councillors of Redbridge who oppose the Bill and for those councillors who have steadfastly opposed it—I believe that those councillors have always comprised one third of the council—if the House were to proceed with the Bill and allow it to reach the statute book. It would be insulting for the House to do that if the council that brought the Bill to the House no longer wished to proceed with it because it had not yet had an opportunity to change its mind on the issue.
I invite my hon. Friend the Member for Ilford, North to discuss with the council representatives who are present this evening whether it would be better, and in the interests of the constituents of Redbridge, for the Bill to be deferred so that proper consideration can be given to whether it is still popular in the constituency and the borough, whether it is still wanted and whether, above all, the council would still put the Bill before the House should it take such a decision today instead of relying on a decision taken two and a half years ago.
I hope that my hon. Friend the Member for Ilford, North will comment on those points. If he does not do so, we must conclude that the Bill is being brought before the House without adequate consideration even by the people living in the borough on whose behalf the Bill is allegedly being promoted.
The final point, which I strongly believe the House should consider when deciding whether we should continue the debate on clause 6, is the fact that we were not told by Redbridge council or by its representatives in the House why clause 6 was included in the first place. Not only are we ignorant of the consequences of removing clause 6: we are equally ignorant of the reasons why it was included. It is important that the House should know whether what Redbridge was seeking in clause 6 were powers in excess of those granted by the Food Act 1984. Redbridge said nothing about that in Committee, despite the fact that counsel for Havering borough and others speaking on behalf of Havering raised that point several times. The point was never answered satisfactorily. Indeed, it was not answered at all.
The House must be ignorant about the purpose behind clause 6 and whether Redbridge was seeking powers well beyond the removal of the rights granted by ancient charter in Romford. The House was going to be used, had clause 6 not been removed, to do something which would have been unique in this country and which would have given Redbridge borough powers that no other borough possesses.
That may be why clause 6 was included in the Bill and perhaps it is being removed because Redbridge borough council has thought better of asking the House for powers that no other council possesses. However, I cannot say often enough or with adequate feeling that the House is not being properly treated or adequately briefed by the Bill's sponsors.
The procedures for private business have worked well for many years. I have served on private Bill Committees and the procedure is comprehensive. However, it is comprehensive only if the good will and good faith of the promoter allows a proper and full examination of the proposals in the Bill. That, dismally, did not occur in this case—although every opportunity was given to the promoter to answer the allegations.
If we had allowed the Bill to pass with clause 6, that could have thrown much ill light on the private Bill procedures. I submit that it would be wrong for us to proceed with the consideration of whether we should continue with clause 6 or allow the Bill to proceed without it. Such consideration cannot happen when we have not received the information that my hon. Friend the Member for Romford and I have been requesting this evening. That information was pressed for vigorously in Committee and the issue has been raised every time this business has come before the House.
I hope that my hon. Friend the Member for Ilford, North will seize this last opportunity and tell the House the facts that we are longing to know and so justify the stance that his council is putting forward as the reason for our supporting the Bill.

Mr. Pike: Unfortunately for the hon. Member for Upminster (Sir N. Bonsor), I am going to delay the hon. Member for Ilford, North (Mr. Bendall) for a few moments, but I also await the comments of the latter.
We welcome the hon. Member for Salisbury (Mr. Key) to the Government Front Bench and congratulate him on his appointment. As he comes here in a virgin state as a Minister tonight, untainted by any previous involvement in this Bill, I hope that he will steer the House to a sensible


conclusion in this debate and defer consideration for six months. I hope that that would be a sensible way forward at the moment.

Madam Deputy Speaker: Order. The motion before the House is whether we consider the Lords amendment. It is not the six months motion.

Mr. Pike: Thank you for correcting me, Madam Deputy Speaker. I am sure that we all understand the situation.

Mr. Neubert: Does the hon. Gentleman take some encouragement from the fact that the new Under-Secretary of State, to whom I extend congratulations, is the hon. Member for Salisbury and has a charter market in his constituency and that he may well therefore be concerned to learn the implications of the Bill for his market? What is more, my hon. Friend the Under-Secretary of State is flanked by my hon. Friend the Under-Secretary of State for Corporate Affairs, who is the hon. Member for Wokingham. He is one of the long list of hon. Members who have markets which benefit their constituents. With such a representation on the Government Front Bench, perhaps greater consideration can be given to the arguments that we have deployed for nearly two years now.

Mr. Pike: The hon. Member for Romford (Mr. Neubert) has rightly made a pertinent point. I have been involved in the debates at every stage of this Bill and I know that concerns have not only centred around the implications for Redbridge and the neighbouring authority, but on the implications for all towns with charter markets.
It was somewhat unfortunate that, although he made his position perfectly clear in previous debates, the hon. Member for Romford (Mr. Neubert) was unable to make a contribution to the proceedings. Tonight he has put forward an extremely good case for why we should not debate the Lords amendment. I congratulate him on that speech. Although I am sorry that he has had to go back to the Government Back Benches, his contribution to the debate has been most welcome, and I shall now concentrate on his final remarks.
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The hon. Member's argument was that we should not debate the Lords amendment because there should be a period in which the local authorities involved should be able to negotiate and consult, to see whether some mutually convenient and acceptable arrangement can be achieved. That is an eminently sensible proposal, which should commend itself to the House. I hope that the House will support that point of view.
We in Burnley have a charter market that dates back about 800 years. We fear that the next thing that we shall see is another Bill relating to another local authority, and then another Bill, and so on. That would be a dangerous precedent. The Burnley market was established by charter on the doorsteps of the church more than 800 years ago, and that pattern has been repeated on many occasions. We have often debated how the distance between markets was established, and so on.
As I said when the hon. Member for Romford kindly gave way to me, the local authority in Burnley has made a major investment in a new indoor and outdoor market. If charter rights had been in jeopardy, there would have

been great reservations about that investment. Many other local authorities have made investments to bring their markets up to modern-day standards. If they thought that their charter rights would not be protected, they would not have made that investment: that is our worry.
I recognise that we are not debating the Lords amendment at this stage, but it is right to refer to the context of the debate. We do not know why, having resisted changes at all stages of the proceedings in this House, at this late stage we are presented with a proposal to delete clause 6. You, Mr. Deputy Speaker, in your role as Chairman of Ways and Means, know very well that the normal procedure with private Member's Bills is that their promoters give reasons for major changes. It is strange that we are not in a position to know why that debate is to take place tonight, why that clause is to be deleted. It represents a major change to the Bill, and that matter is of concern to us.
It particularly worries me that the hon. Members for Romford and for Upminster, even though their local authority is directly affected, have not received the courtesy of being consulted or informed. Since July, we have known that the Redbridge Bill was the business for Monday 15 October at 7 o'clock. We have known that for a considerable time. That is a discourtesy not only to the House but to hon. Members with neighbouring constituencies that are directly involved, who have expressed reservations at every stage.

Mr. Neubert: Does the hon. Gentleman recall that this business was put down at short notice for consideration on 24 July and was not reached then only because of the weight of debate on the private business which preceded it? But for the fact that it was set down for second business on that day, we would have been in this position all those weeks and months ago. Even now we have no explanation. It is quite extraordinary.

Mr. Pike: The hon. Member for Romford is absolutely right. He would obviously be joined not only by the hon. Member for Upminster and others but by the hon. Member for Hornchurch (Mr. Squire), who has taken a close interest in this Bill. With no disrespect to the hon. Member for Ilford, North, who has made his position clear throughout the proceedings, the principal advocate on most occasions has been the hon. Member for Ilford, South (Mr. Thorne), who unfortunately cannot be present tonight. It would be wrong for us to proceed when he is not present to state exactly why the clause should be deleted.
The issues are clear. Hon. Members should refrain from discussing the deletion of clause 6 and allow adequate time for further consultation. That is the sensible course of action to pursue. It would also allow the two authorities involved to get their heads together and perhaps reach an acceptable compromise.
The hon. Member for Upminster questioned whether the people of Redbridge are still as enthusiastic about the Bill as they might have been when it started on its passage a considerable time ago. If we do not proceed tonight, we shall allow time for reflection. It is certainly not my wish to prolong the proceedings, but those two grounds alone constitute extremely good reasons not to debate the Lords amendment tonight. I hope that the House is also of that view and that the matter can be deferred.

Miss Ann Widdecombe: I, too, am concerned about the length of notice that hon. Members


have received. I add my congratulations to those of my colleagues on both sides of the House to my hon. Friend the Minister, the hon. Member for Salisbury, (Mr. Key). I am delighted to see him in a very well deserved post. Hon. Members look forward to hearing his contributions on many occasions.
My hon. Friend and I do not always agree on everything, but I have immense respect for him, which I know is universally shared, and I am delighted to see him on the Government Front Bench. I should like to talk at even greater length on his promotion, but at this point I should address the main question, which is whether we should debate the amendment or whether we should delay.
I was keen to hear the arguments for why we should debate the amendment. When I saw the name of my hon. Friend the Member for Ilford, North (Mr. Bendall) on the screen, I ran in at high speed, because I wished to hear his arguments. I was not coming from a great distance, but, by the time I arrived in the Chamber, he had concluded his remarks. Sadly, therefore, I have heard no argument whatever for our debating the amendment now.
As I understand it, notice of the amendment was given from the other place immediately before we adjourned for the summer recess. Now, on the first day back, this amendment is on the Order Paper. Hon. Members cannot possibly have had sufficient time to consider its implications. I am told that no explanatory memorandum has been submitted, despite endless requests, so that we should know exactly what was in the minds of those in the other place when they decided to make the amendment.

Mr. Pike: Did I understand the hon. Lady correctly when she said that the borough of Havering had specifically requested that an explanatory memorandum should be made available?

Miss Widdecombe: I understand from my hon. Friend the Member for Romford that numerous requests have been made for an explanation. I would welcome my hon. Friend's clarification of that.

Mr. Neubert: I am happy to be able to confirm that numerous requests have been made in this Chamber to my hon. Friend the Member for Ilford, North (Mr. Bendall). All I have been able to do is present evidence to show that the borough secretary and solicitor for the London borough of Havering are as unaware of the background to this most surprising development as we are. Havering borough has been the chief protagonist and petitioner against the Bill in both Houses and one would have thought that that borough at least would have been given the courtesy of some explanation. Certainly the hon. Members representing that borough have had no such explanation, and it follows that my hon. Friend the Member for Maidstone (Miss Widdecombe) is equally underprivileged.

Miss Widdecombe: I am most grateful to my hon. Friend for that clarification.
We are here tonight to discuss something for which we have been given no explanation, either verbal or written. We have not had time to consider it properly, because a number of sitting days have not passed. We have not had time for informal discussion of this important amendment. You may remember, Mr. Deputy Speaker, from my earlier

contributions that I am in sympathy with deleting that clause, but I would not stretch your patience by dwelling on the reasons for that. Nevertheless, I believe that proper forms must be observed. However technically in order it might be, it seems quite improper that such a major amendment of a clause that occupied hours of debate during earlier consideration of the Bill should be sprung on the House, especially as no proper explanation of it has been given.
The proposed change would affect all those constituencies with markets. I was most interested to hear the hon. Member for Burnley (Mr. Pike) discuss the market at Burnley. He may recall that I had an acquaintance with Burnley—not as successful as his acquaintance with it—in 1979. I recall that market extremely well and the great contribution that it makes to Burnley life.
I can understand that the hon. Gentleman is concerned that we should not be precipitated into a situation in which a major Bill, which will create precedents, has an important consideration removed from it—the powers of local councils over the disposal of those markets. I am not surprised that the hon. Gentleman considers that that is unacceptable. I too have a market in my constituency and I am surprised that we have not been given further opportunity to consider the effect of deleting the clause.
When the Bill left the House in the summer, the clause was intact. Those local authorities and markets examining the likely effects of the Bill will obviously be studying it in the form in which it last left the House.

Sir Nicholas Bonsor: My hon. Friend's argument is even more forceful because of the way in which an earlier attempt to get an explanation from the promoter of why the clause was there was so firmly blocked. Every attempt by those opposed to the Bill to challenge that clause was met with a dead-wall defence. No explanation was given at any stage of why the clause was in the Bill and there has been less than zero information as to why it should be taken out of the Bill. That is a complete volte-face from the position adopted in Committee.

Miss Widdecombe: My hon. Friend is absolutely right. In our earlier proceedings on the Bill, I remember that we had a most unsatisfactory time trying to establish why on earth the restrictions under the Shops Act 1950 would not do, and why such an eccentric blanket provision should be built in to give local councils total control over disposals. Such powers would make it impossible for anyone to take sensible commercial decisions. Nobody would know what rules would govern the disposal of markets or parts of markets at the time that they chose to dispose of them.
I remember that questions were raised about nepotism on councils and about frequent switches of political control of councils. Those questions were never answered. We asked for clarification, but we did not get it. Tonight, the clause has disappeared and it has been amended out of existence. We have asked for an explanation, but we have not received one.

Mr. Neubert: My hon. Friend mentioned clause 6. It is important to remember that we have not yet amended it out of existence. We are discussing whether we should consider such a thing tonight. Things are even more mysterious than my hon. Friend has portrayed, because


clause 6 not only existed in the original Bill, but two lines were added to it in the course of proceedings in the House. Lines 16 and 17 provided:
No such transfer or disposal of rights

Mr. Deputy Speaker (Mr. Harold Walker): Order. I think that the debate now is perhaps anticipating the debate that we may have on the amendment. We should confine the debate to the question whether the Lords amendment should be considered or otherwise.

Mr. Neubert: I understand your argument, Mr. Deputy Speaker. I am simply making the point that the proposal as to whether we should consider the amendment tonight arises from an amendment which seems to be in contradistinction to the direction taken by the Committee that amended the clause in our proceedings in this House.

Miss Widdecombe: I am most grateful to my hon. Friend.
I should be grateful for some guidance from you, Mr. Deputy Speaker. Although I understand why we should discuss whether the amendment should be heard, surely the parameters of that amendment and how it relates to the things we agreed earlier are important factors when considering whether to hear that amendment tonight. Although I accept that my hon. Friend the Member for Romford is not in order because you say so, Mr. Deputy Speaker, he was raising a most important consideration of which the House should take cognisance when deciding whether to discuss the amendment.
You have referred, Mr. Deputy Speaker, to a debate that we may well have. I sincerely hope that we do not have that debate without proper time for reflection in order to establish why the clause should be wholly amended. My hon. Friend the Member for Romford is right to correct me from suggesting that the clause has already been amended out of existence, but that is the proposal we are discussing. I sincerely hope that we do not have that debate until we have had time to reflect on the effects of that decision. We should not discuss it until we have time to consult our traders, markets and local authorities to tell them that the situation has changed fairly dramatically. It is important to know that the Bill that left this place is no longer what is proposed.

Mr. O'Brien: The hon. Lady has reminded the House three times that, when the Bill left this place, the clause was intact. When the Committee in the other place considered the Bill, the clause was intact, but on Third Reading in the other place it was suggested that the clause should be deleted. No explanation has been given, and if there is no explanation on record in the other place, we are entitled to an explanation before any Division in this House. Perhaps the hon. Lady would like to address that point.

Miss Widdecombe: I am most grateful to the hon. Gentleman, because he has summarised the matter admirably. He has said what I have tried to say in the course of what has perhaps been a rather long-winded contribution.
Throughout, the clause has been intact. It was challenged at one point, but that challenge was repelled. Therefore, it was reasonable for those considering the practical effects of the Bill to assume that the clause would be an integral part of it. As the hon. Member for Normanton (Mr. O'Brien) rightly said, because it has survived scrutiny at all stages so far, it is fairly surprising

that it now comes back with a proposal for deletion. What practical effect will that have? It means that those considering the Bill and those who have to live with its consequences have a different animal to examine. It is not sufficient for us to take a hasty decision tonight.
I did not know that the clause had been deleted, so I have not undertaken the proper consultation that I would have done had I known. I think that the same would apply to many other hon. Members with constituencies with markets or local authorities with a special interest in the matter. We are not talking about a minor deletion, which we could have swallowed, although we would still have expected the courtesy of an explanation. We are talking about telling local authorities that they will have no control, other than that already enshrined in legislation governing completely different set-ups such as rows of shops, over the disposal of rights to trade in this fashion.
Just as I bitterly opposed the eccentric blanket provision that councils should simply refuse permission to dispose without a specified set of grounds being included in the Bill, I now believe that the Bill has gone the other way and there is too little protection. Now, councils do not have the ability to refuse disposal if they consider that the consequences would be undesirable for the district under their control. I appreciate that, to a certain extent, to debate that is to debate the merits of the amendment. I believe that it is such a major consideration that it is important that those authorities, markets and traders should all have an input. If the clause is to be deleted and nothing is substituted, or the substitution is inadequate, that creates a different sort of Bill from that which left this place, and we have not had adequate time to consider it.

Mr. Pike: As well as the traders and those who use the markets, would not another factor involve the fact that many councils derive crucial income from their markets? I do not want to enter the argument on whether we have poll tax or rates, but local government funding, however it is raised from local residents, can be affected by the proposal we are debating tonight. If a council's income falls, it must affect local charge payers in one form or another.

Miss Widdecombe: The hon. Member for Burnley (Mr. Pike) is absolutely right, and has raised yet another major consideration. As I said, we are discussing not a minor clause but something that will have long-term practical consequences for many local authorities, traders and citizens. Therefore, it is incumbent on us to get it right, which we cannot do with the sort of notice or explanation—or lack of explanation—that we have been given. We should not consider the clause tonight, but should have time for proper consultation.

Mr. Neubert: On that very point, is there not art extra dimension that has not yet been mentioned? This Bill, with a clause 6 that was not only not deleted by the Committee but actually added to in Committee and approved on Third Reading, comes back from their Lordships' House with a proposal to delete that self-same clause. I do not want to exaggerate the issues, but there is a possibility of a constitutional clash between the two Houses of Parliament because one is taking an entirely different view from the other. Therefore, should we not have had some explanation for that at the debate's outset?

Miss Widdecombe: Indeed, and the possibility of a clash makes it all the more urgent that we do not consider the


amendment passed in another place, with the possibility that we shall refuse it. Surely it is better for us to take due time to consult in all the necessary places and consider the consequences of accepting or rejecting the amendment, talk to interested parties and come to a reasoned view rather than one formed on the spur of the moment—as it must be, since this is the first day back.

Mr. Allen McKay: First, I congratulate the hon. Member for Salisbury (Mr. Key) on his new post, although he will not expect me to wish him to be there too long. I hope that he may be Opposition spokesman before too long, rather than a Minister, but I congratulate him.
There are three reasons why we should not discuss the Lords amendment. First—this does not colour my point of view—the Market Traders Association is in my constituency. Secondly, I have a great deal of feeling and nostalgia for markets in my constituency. Thirdly, although it is a Redbridge Bill, it could affect 246 other constituency areas, which means that we must not consider it lightly but should study it in depth to see where we are going.
When the markets were set up by charter 700 or 800 years ago, the people who gave them were wise, because they realised, even then, that there was only so much money to go round and so much trade to be had; to stop dog eating dog, a charter was created that allowed a market to be built and provided that, within a certain mileage of that central market, others should not be built. It did not make it impossible, but it meant that those involved got together and decided on the arrangements.
A practical illustration involves my own little village, Hoyland, under the Barnsley authority, where there was a charter market. The authority came down heavily and said that there could not be another one, but then reason prevailed and, between the parties, they decided what could be done. However, if we do not allow time for such discussion and negotiation, we are in danger of letting the Bill go through inadequately discussed or thought about and, worse still, with the parties involved not having had the chance to get together and decide whether the House should be used as an instrument to pass a private Member's Bill for one part of a district to usurp another part of that district, bringing full authority to bear with the permission of the House—which is how the House is being used. Before we do that, we should think clearly and deeply about it.
If the Bill goes through, we must consider what we are doing to the 246 constituencies with charter markets.

Mr. Dennis Skinner: Why, does it affect them?

Mr. McKay: It could easily affect them, because, once a precedent is created by the Bill, another authority will be able to say, "Wait a minute, they have done it, so we can." If my hon. Friend the Member for Wakefield (Mr. Hinchliffe) and his authority decided that legislation involving their district should be passed, there would be another market between Wakefield and Barnsley.

Mr. Deputy Speaker: Order. With respect, I suggest that the hon. Gentleman's speech would be more appropriate on Second Reading. At this point, we are

considering whether to give consideration to an amendment made in another place. I remind the hon. Gentleman that the Bill received a Second and Third Reading in this House.

9 pm

Mr. McKay: I am hoping that we can prove our point that it would be better not to discuss the Lords amendment tonight, but to let the participants go back and decide for themselves rather than the House deciding for them. If our argument is valid and accepted, we will not need a Second or Third Reading. However, that can be left until later to tidy up any little bits that may return.
While I naturally accept your ruling, Mr. Deputy Speaker, I hope that the points that I have made will stop a Second and Third Reading from taking place. I hope that common sense will prevail.

Sir Nicholas Bonsor: Given that clause 6 has not been explained by the sponsors of the Bill, does that not bear out what the hon. Gentleman is saying? No one has had the opportunity to explore the effect of clause 6, or the effect of removing it. In those circumstances, is it not important that the effect on the other charter markets is explored by the House before we decide even whether to debate the removal of clause 6?

Mr. McKay: Certainly we should have time to explore that. We should not sit back gently and be steamrollered; we are bigger and more important than that. Time should be given for us to have an explanation of what the Bill means.

Mr. Skinner: My hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay) has been here since 7 o'clock listening to the debate. Is he saying that neither the sponsors of the Bill nor anyone connected with its purpose has explained what is in clause 6? We know from experience that some Bills get through without proper discussion, especially private Bills. Is my hon. Friend saying that, despite all our efforts, we cannot get anyone to get up to explain what is in clause 6 and why the Lords have passed the amendment?

Mr. Deputy Speaker: Order. It might be more appropriate to consider the effect of clause 6 and its deletion when we come to debate the Lords amendment. We are debating whether the House should consider that Lords amendment.

Mr. McKay: I can say to my hon. Friend the Member for Bolsover (Mr. Skinner) that we have not had an explanation. If we had, we would probably not be in this position. We would probably have had a better knowledge of the Bill and its effect on other areas and constituencies.

Mr. Neubert: We have proceeded for two hours without explanation from the sponsors for the reasons for the amendment, and we are now being asked whether we should consider it now or in six months' time. I can only assume—

Mr. Deputy Speaker: Order. The six-months motion is not before the House; the question is whether the House should consider the Lords amendment. I have just said that we should wait until the debate on the Lords amendment to find out what clause 6 is all about. The hon. Gentleman is ignoring what I have just said.

Sir Nicholas Bonsor: On a point of order, Mr. Deputy Speaker. I am exposing my ignorance, and at risk of incurring your displeasure, but I do not understand why the Order Paper specifies
That the Lords Amendment be considered upon this day six months"—

Mr. Deputy Speaker: Order. It is not our practice to debate a motion that has not been selected for debate. I repeat that the Question before the House is that the Lords amendment be now considered. I hope that hon. Members will address themselves to that.

Mr. McKay: Our question is why the Lords amendment should be considered. If it were dealt with in that way, it would give more time—time that is needed for explanations, for participation, for us to try to right the mistakes that we will probably make and for us to ensure that, before anything goes out of the House, it has been considered to the best of our ability.

Mr. Skinner: Now we know what we are about. We have had no explanation for two hours, although clearly the Lords passed the amendment. You, Mr. Deputy Speaker, have said that we must speak about the Lords amendment. I ask my hon. Friend the Member for Normanton (Mr. O'Brien): how many Lords were present when they passed the amendment?

Mr. O'Brien: None.

Mr. Skinner: My hon. Friend, who is well informed on these matters, says, "None." That is a tired old state of affairs, is it not? We have had no explanation about clause 6, and when I asked how many Lords took part in the great debate that introduced the amendment, I was told that the answer was none. Now my hon. Friend the Member for Barnsley, West and Penistone (Mr. McKay) is trying his level best to discuss that matter, but we are told by the Chair that we must stick to a narrow formula that precludes my hon. Friend from making any comment at all.

Mr. Deputy Speaker: Order. The hon. Member for Bolsover knows that interventions must be brief.

Mr. McKay: I am grateful to my hon. Friend for explaining the matter in his usual direct and blunt way. The amendment has not been considered in the Lords and we are being asked to rubber-stamp it and forget it—but the House will not forget it.

Mr. O'Brien: As I tried to explain earlier, when the Bill was considered in the other place, it went through Committee in the form in which it left this House, with clause 6 intact. The Bill was given a Third Reading without debate in the House of Lords, and it was then suggested that it should be accepted with the amendment. Never has any reason been given as to why clause 6 should be deleted. That is why my hon. Friend is saying that it should not be considered here tonight, and that is why his appeal is justified.

Mr. Harry Barnes: On a point of order, Mr. Deputy Speaker. I have just been to the Vote Office, and it seems that Sharpe Pritchard, the parliamentary agent for the Bill, has distributed the wrong copy of the Bill to the House. The copy that we have contains no clause 6, so the amendment, which reads
page 4, lines 9 to 17, leave out clause 6",

refers to part of clause 4 and part of clause 5.
I ask for your guidance, Mr. Deputy Speaker. I should have thought that we should discontinue this sitting at least until Sharpe Pritchard gives us proper copies of the Bill. Then we should start again from the beginning, since we have been discussing something that does not exist.

Mr. Deputy Speaker: I may have misheard the hon. Gentleman. Did he refer to a Bill which he has just obtained from the Vote Office?

Mr. Barnes: I collected the Bill from the Vote Office as I came in. It is not the correct Bill because page 4, lines 9 to 17 are not part of clause 6. There is no clause 6 in the Bill; parts of clauses 4 and 5 are being referred to.
Until this has been corrected, the House cannot proceed with this measure. You, Mr. Deputy Speaker, may hold a copy which is correct, but hon. Members are in the dark.

Mr. Deputy Speaker: The hon. Gentleman will have seen me taking advice while he was addressing the Chair. I am advised that the Bill that is available in the Vote Office does contain all the clauses—I refer to the House of Commons Bill. The hon. Gentleman may have been supplied with a copy of the House of Lords Bill, in which case there has been a mistake at the Vote Office. But I understand that copies of the House of Commons Bill contain the clause to which he refers.

Sir Nicholas Bonsor: Further to that point of order, Mr. Deputy Speaker. I also collected from the Vote Office a copy which does not contain the clause. If you like, I shall go to the Vote Office and check whether it has a copy that contains the clause, but the copies that have been given to Members who have asked for them certainly do not contain it.

Mr. Deputy Speaker: I shall take immediate steps to obtain clarification, and I suggest that, until the House obtains it, we continue the debate.

Mr. Harry Barnes: Further to that point of order, Mr. Deputy Speaker. I went to the Vote Office twice. When I examined the Bill that I had collected, I wondered what on earth was being discussed, because I could not find the clause in question. I returned to the Vote Office, which told me that Sharpe Pritchard had distributed the wrong copy of the Bill and that someone from the Vote Office had rung up the agent to try to get hold of the correct copy.

Mr. Deputy Speaker: As I have suggested, perhaps we should continue until I have obtained clarification, when I shall report to the House.

Mr. Skinner: Further to the point of order, Mr. Deputy Speaker. This seems a bit cock-eyed to me. We have just discovered that we are debating a clause of which Members have no copy. It is high time that you took a decision and suspended the sitting so that you can get in touch with Sharpe Pritchard—it will cost a tidy fortune, I am sure.
I know that it is the first day back after the 10-week holiday, but one would have thought that these well paid parliamentary agents would have produced the Bill on time. As we cannot discuss it, I think that the sitting should be suspended and we should start again another day.

Mr. Deputy Speaker: Order. The hon. Gentleman heard my decision. We shall continue until the matter has been clarified.

Mr. McKay: We now see the importance of what we are discussing. Amendments were introduced on Third Reading in the other place. They were approved without debate and passed to us. Clause 6 is not in the Bill, so it must have been decided that we would rubber-stamp the decision to leave it out. We got hold of a copy of the Bill that does not contain clause 6. It is important to find out whether the sitting should be suspended, but it is more important for every hon. Member to realise what he is voting on.

Sir Nicholas Bonsor: There is precious little chance of the House knowing what it is voting on when hon. Members have the wrong copy of the Bill and have not had a word of explanation from the promoter about why the amendment has been tabled or why the clause was there in the first place. Therefore, a proper debate on the matter is impossible. That is why we are moving an amendment to try to defer discussion on the removal of clause 6 until we have had a proper chance to consider the consequences to the Bill.

Mr. McKay: The hon. Gentleman is perfectly correct. Matters get worse as we go on, because we continue to find little wrinkles and caveats. We should opt for a proper debate by deferring the whole matter so that we can get the proper documentation and a proper explanation. Before we take any decision, we must be fully aware of all the facts.

Mr. Harry Barnes: We cannot discuss whether to leave out clause 6 because we do not have that clause in front of us and do not know what is to be left out. If we are obliged to vote on we know not what, we shall have to vote against the measure in order to prevent procedural nonsense. I hope that we are not obliged to decide on a matter that is not in front of us, because that would be acting blindly. Much happens in the House as a result of partial understanding and it is assumed that things are done according to the correct procedures. However, when we sus a matter out and discover the problems, we must correct them so that we do not pass defective legislation.

Mr. Neubert: Perhaps I could clear up some of my own procedural nonsense. I was rightly pulled up and told that we were discussing a motion about whether to consider the Lords amendment. As my hon. Friend the Member for Maidstone (Miss Widdecombe) has said, it was all over in a flash. I thought that we were discussing the motion to defer discussion for six months and that was why I said that I hoped that the motion would be carried. Now I know that the motion is to consider the Lords amendment and I am opposed to that and will vote accordingly.

Mr. Harry Barnes: We should not be asked to vote on the Lords amendment. If we are obliged to do that then we shall go into the No Lobby in order to prevent constitutional and procedural nonsense.

Mr. Bob Cryer: I listened to the first part of the debate and at that stage it was about whether the House should discuss the Lords amendment. I now understand that the Lords amendment is not available and that nobody knows what it is. Does my hon. Friend agree that, if the House proceeds in this way, it will undermine

parliamentary democracy because we could be accused of approving something that is secret and about which no hon. Member knows anything?

Mr. Barnes: In fact, the Lords amendment is not missing. I have a copy of it, and it states
Page 4, lines 9 to 17, leave out Clause 6.
We could debate that—

Mr. O'Brien: On a point of order, Mr. Deputy Speaker. I hope that you can guide me. You called my hon. Friend the Member for Derbyshire, North-East (Mr. Barnes), but he does not have the necessary information to enable him to make his speech. It is quite ridiculous that hon. Members should have to address the House when they do not know what they are talking about. That could be rectified by adjourning the debate until the necessary information is available. I appeal to you to ensure that my hon. Friend has the details that he requires to address the House.

Mr. Skinner: Further to that point of order, Mr. Deputy Speaker. My hon. Friend the Member for Normanton (Mr. O'Brien) is right. If the debate were being televised—as, indeed, it might be—people would think it was another Monty Python sketch. When the amendment came before another place, no one spoke to it. There are 1,100 Members in the other House, but not one opened his mouth to discuss the amendment. They have sent it to the House of Commons to be debated on the first day after the holidays, no doubt thinking that no one would be here.
Here we are, but clause 6 does not even appear in the Bill. Hon. Members are debating clause 6, but no one knows anything about it. It is like that parrot—it is extinct, it is dead, it is late, it was, it is no longer. If we do not keep talking until 10 o'clock, the Tories will bring in their troops. None of them will have listened to the debate, but they will be told by their shop stewards to walk through the Lobby and vote for the motion.
I ask my hon. Friend the Member for Normanton to do his level best to talk about the non-existent clause for as long as possible in the interests of parliamentary democracy. I suppose that this is what they do in the Common Market. It is probably a Common Market system. After all, the debate is about markets—

Mr. Deputy Speaker: Order. Is this an intervention?

Mr. Skinner: It is a point of order, Mr. Deputy Speaker. I ask you to send for Mr. Speaker, the man in the full gear. That will make the sketch complete.

Mr. Harry Barnes: rose—

Mr. Deputy Speaker: I call Mr. Bendall.

Mr. Barnes: On a point of order, Mr. Deputy Speaker. I was on my feet when the first point of order was raised. I waited for you to respond to the point of order, but you did not. You chose to call another Member.

Mr. Deputy Speaker: If the hon. Gentleman is patient for half a minute, he will realise that, in an indirect manner, I am responding.

Mr. Bendall: Perhaps I can assist the House—

Mr. Neubert: On a point of order, Mr. Deputy Speaker. Is this further to the points of order that have already been raised, or is it a speech?

Mr. Deputy Speaker: It is further to the points of order.

Mr. Bendall: The reason that I did not delve deeply into clause 6 when I opened the debate was that it was not the subject of our debate. However, as the Bill deposited in the Vote Office—which I understand is the Bill that the parliamentary agents were told to deposit—is causing such great concern, I beg to move, That the debate be now adjourned.

Question put and agreed to.

Debate to be resumed on Thursday next.

Financial Services and the Single European Market

Postponed proceeding resumed on the Question, That this House do now adjourn.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood): It was fortunate that I was here during that long interruption in our debate on financial services. It is a pleasure to have time to respond at greater length to the many good points that were made earlier, and to have an opportunity to allow right hon. and hon. Friends who want to intervene to do so.
The hon. Member for Redcar (Ms. Mowlam) asked about compensation. The Government believe that the United Kingdom's compensation arrangements are among the most generous in the world, and are certainly good by comparison with many available on the continent of Europe. I remind the House that the Securities and Investments Board scheme provides 100 per cent. compensation for eligible claims up to £30,000 and 90 per cent. compensation on the following £20,000.
In the case of bank deposits in the United Kingdom, compensation covers three quarters of the first £20,000 of duly protected deposits, and for insurance policy holders, it amounts to 90 per cent. of contract rights, and 100 per cent. if those contracts are compulsory—as is the case with motor insurance. There is no upper limit to those claims. The compensation rate in respect of building societies is 90 per cent. on the first £20,000 on deposit.
The hon. Member for Redcar asked about the arrangements that we intend to make in the wider European market for adequate compensation and consumer protection. Under the present system, companies offering services in the United Kingdom from other countries within the European Community can do so without offering compensation under any approved scheme, and even without full disclosure of the status of the service that they are offering in relation to compensation.
The Government intend to tackle that problem in two phases. First, in the negotiations on the investment services directive and capital adequacy directive, we want written into the rules the provision that compensation arrangements should be clearly disclosed to potential customers in the United Kingdom, so that they will know whether the country from which the service provider comes offers compensation and, if so, the nature of the scheme. That will be a distinct advance in consumer protection compared with the current position.
Secondly, we should like to negotiate with our partners in Europe more common arrangements for minimum levels of compensation across the Community. We have been told by the Commission that it is working on a proposal in this area but obviously that will take time, as there are many obstacles to be overcome. Therefore, those arrangements will not be in place at the same time that the single market in financial services is in place—I trust, by 1 January 1993. However, we shall encourage the Commission to work as fast as possible on this second phase of our policy, because we share the Opposition's


concerns and want to tackle the problem first by disclosure and, in due course, by more common arrangements.

Mr. Tam Dalyell: Are we to take it from the Minister's remarks that there is resistance from the Commission in that important matter? What is the likely timetable?

Mr. Redwood: I cannot speak for the Commission, although I do not know of any resistance to the general idea. The main problem is that the Commission is naturally giving priority to all the measures that are necessary for the single market in 1992. We are pleased that it is giving considerable priority to the insurance directives, which the House emphasised again tonight, quite rightly, that it wants to see introduced with due speed. I am sure that the Commission will then turn to the question of compensation, and the Government will give it every encouragement and offer whatever support we can in that work.
I was asked whether we offered to consult consumer bodies. Of course we did, and we shall continue to do so. The Consumers Association is regularly consulted and is being most helpful, and the National Consumer Council has also been informed of our work. Some more general questions were raised about the consultations that we are having in respect of the investment services directive and the complementary capital adequacy directive. Again, I invite all those who have not written in to do so, so that we know their views, because the Government wish to proceed with negotiations in Europe based upon the fullest consultation.

Mr. John Marshall: When my hon. Friend is consulting on those directives, can we have an assurance that he will consult practitioners in the industry? For example, is he aware that the unit trust industry is worried that the costs of regulation in the United Kingdom are so high that some unit trusts may decide to set up in Luxembourg where they are lower? In a free market, he runs the risk of over-regulating the United Kingdom market, and encouraging such mobile jobs to go elsewhere, which is of no benefit to this country.

Mr. Redwood: In my earlier remarks I said that we were trying to move on to the next phase of our regulatory progress in this country, when there should be less prescriptive rule-making and expensive, detailed activity by the regulators, and more concentration on compliance. That should answer some of my hon. Friend's questions. As to the desirability of Luxembourg as a place in which to undertake certain types of investment business, I have looked into the question of undertakings for collective investment in transferable securities and into whether it would be more sensible to set them up in Luxembourg rather than in the United Kingdom. The results that I have received show that both on tax grounds and on grounds of regulatory cost, it is by no means clear that Luxembourg is preferable. Several hon. Members raised the question whether we had the right tax regime to encourage and maintain business in this country.
In the case of UCITS, one has to look into both the territory in which the investor is placed and the territory in which the business is conducted. One has to draw up a

complicated matrix for different tax arrangements, affecting both the provider of the investment product and its consumer. That matrix shows that in many cases it can be better to set them up in the United Kingdom than in Luxembourg.
Those hon. Members who are worried about any tax implication for British business should of course draw it to the attention of my right hon. Friend the Chancellor of the Exchequer.

Mr. Cash: I should be grateful if the Minister could comment on the position of the independent financial advisers. I should declare an interest, because I have followed their concerns very closely over a period, and indeed was concerned with them when I was on the Committee considering the Financial Services Bill 1986. About 20 million consumers receive advice from the independent financial advisers. It worries us, both in respect of capital adequacy and in relation to over-regulation, that they could be squeezed out as a result of some of the directives that have been coming from Europe. I may have an opportunity to elaborate on this later. May we have an assurance that the Minister has this—I am sure he has—very much in mind and that he will be looking after them? After all, they represent a significant part of the market in this country.

Mr. Redwood: My hon. Friend is quite right. The independent financial adviser is an important intermediary in the British marketplace. A lively market for independent financial advice is something that we wish to preserve and strengthen wherever possible.
The main question relates to the negotiation of the capital adequacy directive. It has been largely a British initiative, which has seen the introduction of different levels of capital requirement related to the risks that businesses are running. We thought that it was quite wrong to have a single passport requirement, with a large sum of money, such as 500,000 ecu. That would be impractical for the independent financial advisers.
We are also keen to ensure that independent financial advisers who so wish can have access to the passport under the investment services directive and can carry out their business in other member states. That requires the introduction of three other levels. We have introduced a system whereby businesses that provide only investment advice and that do not handle clients' moneys are exempted from any capital requirement. Another category, supplying advice and perhaps ensuring that deals are executed on behalf of clients, is subject to a requirement of 50,000 ecu, and businesses that also handle client moneys but that do not deal on their own account are subject to a capital requirement of 100,000 ecu.
That is a huge improvement on the starting position of those negotiations, but the British Government are not yet satisfied. We wish to ensure that there are further advances. We are still arguing over how many people should be subject to the minimum 50,000 ecu capital requirement and we still think that too many are caught. We are discussing details of the calculation of the capital requirement for more sophisticated businesses, particularly the illiquid asset calculation, which is too onerous in the current directive. In that connection, the Commission may agree with us and I look forward to reporting progress in due course to the House on that subject.
The hon. Member for Redcar posed a particular problem over insurance provision involving Switzerland, Italy and Spain, and she hoped that EC action might solve it. Unfortunately, by including Switzerland in her case that would be impossible because the Swiss are not governed by Community rules. Had she chosen three Community countries, that would have been the kind of issue that we would consider as we developed the directive programme covering all types of financial business.
Several hon. Members, including the hon. Member for Berwick-upon-Tweed (Mr. Beith), asked about barriers to takeovers. They are right that the Government have been exercised by the relative difficulty that many UK companies find in making takeovers on the continent of Europe compared with the relative ease with which European companies can make takeovers here. Progress is being made. The British Government have raised the issue with the Commission, which has responded by agreeing that it is a problem and introducing a work programme to attack some of the legal obstacles through directive proposals, for example in the 13th directive on company law.
Many hon. Members will agree with the Government that the obstacles are often fundamental and more cultural than legal. Often the law codes of the countries concerned permit companies to operate in one of many ways and they do not have to operate as they do. This weekend I was heartened to see in the newspapers comments that attitudes in Germany are changing as a result of the general discussion on barriers to takeovers. Many people in Frankfurt and, indeed, in Paris, where changes are more rapid, are coming to see the force of an open market to challenge existing management and to provide a more active marketplace in which ownership of companies can change hands as well as secondary shares in more limited packages.
We are making progress in the general argument and in tackling the cultural barriers, which are every bit as important as, if not more important than, the legal barriers that we have already identified with the Commission and that may in due course be tackled in some of the directives that we are considering.
My hon. Friend the Member for Wirral, South (Mr. Porter) and many other hon. Members agreed with the Government's position that progress on insurance is too slow. He would also agree that speed is picking up a little. The British Government intend to help that along its way. I reassure him that if the opposition comes only from Belgium and Germany—they have been opposing some of these measures—they do not constitute a blocking minority in the Community, so progress can still be made. We must ensure that a blocking minority does not build up against the principle of freedom of provision in insurance. The British Government's strategy is designed to achieve greater unanimity among member states in favour of the proposal, and to prevent a blocking minority against the proposal.

Ms. Marjorie Mowlam: In the absence of the hon. Member for Wirral, South (Mr. Porter) and as I listened to his speech, may I say that he is well aware that two countries do not make a blocking minority in the EC? He was worried, as are we, about the structural differences that are built into the insurance industry. It is the structure, particularly between the banks in Germany and France, which makes it difficult for our insurance industry

to compete in what in directive terms may look like an open market, but which in practice is backdoor protectionism. That anxiety was voiced by hon. Members on both sides of the House. It would be useful if the Minister could explain how cultural differences that are slowly waning will prevent our insurance industry from having a fair and open competitive market in Europe in the next couple of years.

Mr. Redwood: That is not the concern that. I was addressing. However, I have heard the hon. Lady's point. I believe that our insurance companies in many areas have superior products at extremely attractive prices. That will come out within the single market once there is a legal framework that entitles them to work on a services or a branch basis under the necessary directives. It is with that in mind that the House agrees that we should make due speed in negotiating the directives to give them that chance.
The hon. Member for Rotherham (Mr. Crowther) was worried about the dangers of concentration, particularly in accountancy. The purpose of our competition regime is to prevent damaging or dangerous concentrations. The mergers and competition regime applies to accountancy just as it applies to anything else. Each case is looked at on its merits and the Director General of Fair Trading offers advice to the Secretary of State accordingly.
The hon. Member for Rotherham claimed that fraud is widespread. He cast aspersions on practically the entire City and much of the corporate sector. I say to him and other hon. Members who make such allegations that if they bring us the evidence in these cases, I promise that they will be investigated and, if necessary, brought to court. However, general allegations are far from helpful. They put British business in a bad light when viewed by others from abroad, and, if nothing can follow because there is no evidence, everybody is left feeling dissatisfied that the allegation has been made but there has been no follow-through.
My hon. Friend the Member for Brentwood and Ongar (Sir R. McCrindle) made an extremely important contribution. He asked about taxation.

Mr. Dalyell: In the absence of my hon. Friend the Member for Rotherham, (Mr. Crowther) I should say that he was a member of the Select Committee. I was not a member of that Committee but I understand that it looked at the matter in some depth. Are the Government saying that the Select Committee was ill-informed?

Mr. Redwood: I have nothing to add to what I have already said. If there is evidence of fraud, we need it because we shall pursue it vigorously. If there is no evidence, it is a silly allegation.
I should like to remind my hon. Friend the Member for Brentwood and Ongar that the changes in stamp duty and the taxation of options and futures introduced by my right hon. Friend the Chancellor in his Budget are welcomed in the City of London because they will help the competitiveness of the City no end. They are examples of the way in which the Government will listen carefully to those who make out a case that our competitiveness is being damaged by our taxation regime and will respond if the Treasury thinks that it is right to do so.
My hon. Friend the Member for Brentwood and Ongar also mentioned the illiquid assets test. I promise the House that we shall pursue that adequately. In our consultation


document, we set out a number of areas in which we think that illiquid assets are too stringently defined. We started with a capital adequacy directive that may have required City of London firms to increase their capital by around 40 per cent. or more. As a result of the major changes that have come about largely at the Government's insistence, the capital requirement may be 10 per cent. or so above the current levels. We believe that the current levels are about right. We think that they are safe and prudent and allow people to make some return on their money. If we can get the right result of the illiquid assets test, we may be nearly there on the capital requirement that we seek.

Mr. Cash: Does my hon. Friend agree that the question of capital adequacy should be weighed against the question of competence? After all, people can come by money in all sorts of ways, which enable them to support the requirements laid down by law but not to deliver the goods to the customer. Surely it is important—I tried to suggest this with a fated amendment to the Financial Services Bill—that competence is a requirement as well.

Mr. Redwood: Part of our system relies upon assessing the fitness of people to run businesses and, in some cases, to assess their solvency. These are the basic principles needed to run a successful regulatory system.
Most of the other hon. Members made points—

Ms. Mowlam: rose—

Mr. Redwood: I should like to leave time for other contributors. Two other hon. Members would like to speak and I think that I should press on.
Most of the other contributors to the debate reiterated points that had been made by others. My hon. Friend the Member for Gosport (Mr. Viggers) was keen to ensure that reciprocity does not damage us. The Government agree with that. He was worried about the position of off-market trading. The Government recognise that difficulty and will strive to protect our interests on that important issue, which will be one of the difficult negotiating points in the next phase of the negotiations on the directive.
The hon. Member for Warrington, North (Mr. Hoyle) thought that we needed statutory regulation rather than self-regulation. That misconception is shared by some other hon. Members. We have a system, established under statute, of professional regulation backed by practitioners who are involved in the process of regulation. It is not a pure system of self-regulation; it is professional regulation with practitioner involvement to keep people's feet on the ground.

Mr. John Marshall: Does my hon. Friend agree that one of the greatest problems facing the financial services sector is the quality of auditing? Professional regulation does not seem adequate to stop auditors from signing rather duff dockets.

Mr. Redwood: The accountancy profession will shortly come under new arrangements, and the Department will be considering carefully those seeking recognition under the legislation because we are keen to ensure the highest standards of audit. However, I should not wish to associate myself with the attacks made by some Opposition Members on standards of auditing and the

way in which the profession is conducted because much of the work that it does is first class and should be recognised as such.
Our system, which is rather similar in many ways to the Securities and Exchange Commission and its SROs, is based on the Securities and Investments Board, established under statute and backed by self-regulatory organisations—professional regulation with practitioners to keep people's feet on the ground. We wish to strengthen those elements because we believe that we need rather more compliance and detection work and rather less rule-making.

Mr. Anthony Nelson: The financial services industry has a doughty champion in my hon. Friend the Under-Secretary, who has had the good fortune of an extended opportunity to answer in some depth the important debate that we have had today.
I am pleased that we have been able to continue this debate and to allow further contributions, because it allows Parliament to be seen to be scrutinising carefully the contents of an important report from a Select Committee and to be taking the Government reasonably to task on their policies and views.
Everyone acknowledges that the financial services industry is vital to our economy and that it will be so in the ensuing decade. It accounts for some £7·7 billion of our invisible trade surplus, it employs more than 1 million people and an enormous proportion of our gross national product, some 10 per cent., is generated by it. In recent years it has had to adapt to enormous changes in the marketplace, perhaps above all in technology and in the regime of national and supranational control. Great accolades should be given to British financial services—the banking and investment industries—for the way in which they have responded to these challenges, have surfaced with profit and appear well set to weather the wind of competition in the next few years.
The Select Committee report, albeit lengthy and strewn with many recommendations, was an important study for it to undertake, and I should like to see it be a more permanent feature of the landscape rather than a one-off investigation. I have long felt that our parliamentary processes for scrutinising and considering Government policy on these matters are woefully inadequate. The American system of a congressional banking committee, which allows for scrutiny and a legislative role, is an excellent model, but, because of the demarcation of the Treasury and Civil Service Select Committee and the Trade and Industry Select Committee, the former scrutinising banking and the latter financial services, we have never had the proper vehicle for considering this important aspect of our economy.
I urge my hon. Friend the Member for Hastings and Rye (Mr. Warren) to consider the possibility of establishing a Sub-Committee of the Select Committee on Trade and Industry whose remit would be to consider and report on the financial services and banking industry throughout the year.
As I said earlier, I believe that there should be a more formalised approach to the consideration of annual reports—particularly those of bodies such as the Securities and Investments Board. We set those bodies up under the Financial Services Act. They have enormously important


powers of investigation, prosecution and restitution and it is absolutely right that they should be accountable to the House as well as to the Government of the day. Not only are Government moneys invested in bodies such as the SIB; the integrity of the City as a fair market for investment services is at stake. I believe that the bodies themselves would not wish to be the only judges of their policies and would welcome the opportunity to explain themselves, at least annually, to a Select Committee of the House.
I am pleased to note that one of the Committee's recommendations was that we should become a full member of the exchange rate mechanism. That was a timely recommendation, speedily acted on by the Government. I tabled the original early-day motion calling for immediate membership of the ERM—some 12 years ago, believe it or not—which drew the support of signatories such as the present Chief Whip and a large number of members of the Cabinet, so I was delighted when the event took place, albeit not before time.
I hope that, now that the light has been seen, a constructive attitude will be taken to the much more important negotiations that will take place at the December conference on economic and monetary union. We should not take entrenched views on the commonality of the medium of exchange. No one really minds what colour a bank note is or what faces or names are inscribed on it. The important thing about a bank note is that it should be worth something and that it should maintain its value; its worth should not dive one day and soar the next. It is also important that one should not have to pay an extortionate rate of interest if one wants to borrow to buy a business or a house.
Most people who have adjusted to pounds and pence rather than pounds, shillings and pence will see that they have a distinct self-interest—as our country will see it has a national interest—in having a secure and valuable medium of exchange. For the industries that we are debating, a commonality of medium of exchange would be far preferable to a number of different media of exchange operating within the single market.
Let me give an example. Part of the debate about the entrenched protective position of the German insurance industry has to do with the rules that apply to the way in which assets are held in Germany. From the German perspective, it has not only been necessary but has been a good and right financial judgement that a large part of the assets should be held in deutschmark-denominated liquid currencies as well as in equity currencies. That is because not only the companies concerned but the money-denominated assets held have maintained a very strong value. One can understand why German insurance companies should be loth to accept an outside directive that tells them that they must hold a higher proportion of their assets in the currency-denominated assets of other countries, which may be more vulnerable. With the more rigid system that the ERM provides, or if we moved to a common currency system—the common pound or the common ecu—that problem would disappear because we would have one medium of exchange. That would make the operation of the single market a good deal easier.

Mr. Cash: My hon. Friend should cast his mind back to the middle ages or the 16th century, or perhaps to the Spanish inflation problems of the 17th century or to the gold standard and the problems of the 1920s, as well as

considering the current situation. It is only too apparent that it does not matter what the currency is. What matters is the relative strength of the economy, which in turn is the determining factor in the strength of an individual currency. In other words, the strength of an economy, its competitiveness, how much one is saving, the manner in which productivity is operated and the extent to which unit labour costs are involved reflect the genuine strength of an economy. It does not matter a fig whether one refers to an ecu, a pound or a lire.

Mr. Nelson: I concur with my hon. Friend and I do not detract from his analysis. However, the currency that is commonly used in the United Kingdom is used in regions that have different economic performances, just as we live within a European Community with regions with different economic performance. My hon. Friend is right to state that there is a correlation between economic performance and the actual value and the exchange rate value of one's currency over a period of time.
However, we are in no position to be vainglorious. It is not as if the performance of our economy has been outstanding in comparison with other European countries. Why must business men and constituents in my area pay nearly double the rates of interest to be found in other ecu currencies? Why do we have nearly double the rate of inflation of some other European countries? It is not as if we are in an enormously strong position and are worried that somehow the exchange value of the pound will be diluted by joining the other currencies. Far from it. We are the supplicants. We need the disciplines and higher standards of prudential control which I believe membership will bring about. It is extraordinary for some elements of my party and others abroad to suggest that we need tighter financial control and greater prudential requirements and then to refuse to ally us to the mechanisms to enforce that discipline.
With regard to takeovers, I was interested in the Select Committee's recommendations on the Commission's report, which I hope will be published. I should like my hon. Friend the Parliamentary-Under Secretary of State for Corporate Affairs to consider two aspects. The first relates to the takeovers directive which states that a key feature of that directive shall be the fundamental principle that shareholders should be treated equally.
I have always been slightly mystified by that statement as a principal objective of the takeovers directive. My view, as I have explained previously, is that the fundamental principle must be the right and ability of shareholders first and foremost to decide how to dispose of their assets. There must always be compelling reasons if that right is to be taken away from them. That is not a matter of equality between classes of shareholders; it is a right which attaches to all shareholders.
My second point relates to a directive on disclosure requirements. The threshold at which disclosures have to be announced on a European level is 10 per cent., while it is 5 per cent. in the United Kingdom.

Mr. Redwood: No, it is 3 per cent.

Mr. Nelson: I am grateful to my hon. Friend for correcting me.
I assume that that position will continue and we shall continue to operate a stricter and more open system of disclosure. However, if we are playing on a level playing field and we are not giving other companies an undue right


to be exempted from takeovers and for minority stakes to be built up elsewhere in the European Community when they are a matter of disclosure here, I hope that we shall press for some changes in that regard.
I want to make several points about the single passport which is the ability to obtain authorisation as a bank or investment company in one European country and to offer those services throughout the Community. We must remember that our interests involve investor protection. We are not about trying to grease the wheels of the financial services industry. We are here principally to protect and enhance the rights of investors and companies to raise money. In doing that we must consider the best financial deal on the market. We want to see competition in the banking and financial services industry and the best competition need not necessarily come from within the European Community. It might come from Japanese or American companies.
Therefore, there is the matter of extending the passport to countries such as Japan and the United States. I should not like to feel that, in creating the single market, we were erecting barriers against Japanese or United States financial services and banking industries. Some right hon. and hon. Members may say, "That is not necessary, because they are in a strong competitive situation anyway." However, we can tie some access to the European single market with reciprocity, which is sorely needed and would overcome criticisms that we are just creating a customs union, a tariff barrier and a preference for companies within the European Community.
I was struck by what the hon. Member for Redcar (Ms. Mowlam) said about consumer interests. As far as I am aware there is no specific directive on consumer interests. As I understood her speech, in addition to implementing the directives and arriving at 1993, she would like a greater international and public awareness of their protections, their opportunities and the safeguards that are being extended to them. I wholeheartedly agree with that. The hon. Lady's intentions were sound, but whether they should be the subject of a recommendation or a directive, I know not. The principal responsibility should rest with self-regulatory organisations. After all, it is in their interests to promote use of the markets of which their members are subscribers.

Ms. Mowlam: A consumers directive has been knocking around the Commission for some time. Its initial stages of negotiations will start in December 1991. The point I was making is that that means that it will not be in place when the other directives on investment services, capital adequacy and secondary banking are implemented in 1993. They are not being given the same importance, weight and balance as the other directives that we discussed earlier.

Mr. Nelson: I am obliged to the hon. Lady. Nevertheless, I have been supporting her comments and she might agree with what I say.
There are two other small points. One is about the directive on payment systems. I believe that there is a recommendation rather than a directive on payment systems. I should like to see that upgraded to a directive. Whether we like it or not, the credit card industry is a medium of exchange and payment which is here to stay.

Credit card fraud is a multi-million pound business with professional crime involved, people being ripped off on a massive scale, and numerous new entrants to the market coming forward to tie loyalty to their business by issuing a card. We must regard much more seriously credit card fraud and professional operators. The Government should look much more carefully at that matter.
The other point relates to the winding-up directive. Although it may seem a little negative to consider such matters, I believe that winding up has an equally important part to play in the protection of investors as sponsoring the burgeoning of new industries. I should like to feel that winding up was instigated at the appropriate moments, that there were common rules and that it was given the importance that should be attached to it.
The Securities and Investments Board, in its role in the financial services industry in this country, deserves a word of support and commendation. Its chairman and members have worked extremely hard to provide orderly markets and communications with the SROs which they scrutinise. It is interesting that, under section 105 of the Financial Services Act relating to investigation powers, in the years since the Act has been in operation there have been 40 investigations and action has been taken in 21 cases by the self-regulatory organisation or by winding up. In five cases there has been restitution and in eight cases there have been criminal prosecutions on matters of fraud or conduct of business. In addition, there have been 330 cases of alleged unauthorised operation of businesses which can amount to a criminal offence. Fifty-seven of those have been resolved. There have been eight prosecutions and two civil injunctions, and 27 cases have been withdrawn. Many other cases have been resolved.
Many hon. Members who have called for the sweeping away of the system set up under the Financial Services Act and its narrowing down into a smaller number of bodies should respect the fact that a great deal of hard work has been done day by day to identify and follow up cases of alleged fraud.
Let those who call for the sweeping away or amalgamation of self-regulatory organisations remember that, if that were to happen, there would be a real danger of our moving towards even more centralist control. After all, if the SIB were to absorb all the self-regulating organisations we would end up to something more akin to a Securities and Exchange Commission.
For all those reasons, I believe that the existing structure set up under the Financial Services Act 1976, uncomfortable as it may have been in its inception, has worked to the advantage of the City and will continue to work to the advantage of our economy.
I welcome the response of the Government today and the contribution that the report of the Select Committee has made, but it must not end here; the scrutiny must continue.

Mr. William Cash: I think that I must be very brief—I think it is time for me to sit down.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

PROCEDURE

Motion made,

That this House agrees with the recommendations contained in the First Report of the Select Committee on Procedure of this Session (House of Commons Paper No. 379).—[Mr. Wood.]

Hon. Members: Object.

QUESTIONS TO MEMBERS, ETC.

Motion made,

That with effect from the beginning of the next Session of Parliament Standing Order No. 17 (Questions to Members) and Standing Order No. 18 (Notices of motions, amendments and questions) be repealed and the following Standing Orders be made—

Time for taking questions

(1)—Questions shall be taken on Monday, Tuesday, Wednesday and Thursday, after private business has been disposed of.

(2) No question shall be taken after half-past three o'clock, except questions which have not appeared on the paper but which are in Mr. Speaker's opinion of an urgent character and relate either to matters of public importance or to the arrangement of business.

(3) Any questions tabled for written answer on a day on which the House does not sit by reason of the continuance of a previous sitting shall be deemed to be questions for written answer on the next sitting day and shall appear on the Order Paper for that day.

Notices of questions, motions and amendments

(1)—Notices of questions shall be given by Members in
writing to the Table Office.

(2) A notice of a question, or of an amendment to a motion standing on the Order Paper for which no day has been fixed or of the addition of a name in support of such a motion or amendment, which is given after half-past ten o'clock in the evening shall be treated for all purposes as if it were a notice handed in after the rising of the House.

(3) A Member shall indicate on the notice of any question whether it is for oral, written or priority written answer.

(4) Where a Member has indicated that a question is for priority written answer the Minister shall cause an answer to

be given to the Member on the date for which notice has been given, provided that the requirement of notice shall be the same for such questions as that prescribed in this order for questions for oral answer.

(5) Notice of a question for oral answer may not be given on a day earlier than ten sitting days before the day for answer, provided that, where that earliest day would otherwise fall on a Friday, the earliest day on which such notice may be given will instead be the previous sitting day.

(6) Notice of any question for oral answer must appear at latest on the notice paper circulated two days (excluding Saturday and Sunday) before that on which an answer is desired.

(7) When it is proposed that the House shall adjourn for a period of less than four days, any day during that period (other than a Saturday or Sunday) shall be counted as a sitting day for the purpose of calculating the period in paragraph (5) of this order.

(8) When notice shall have been given of a Motion for the adjournment of the House for more than three days Mr. Speaker may cause to have printed and circulated with the Vote a memorandum superseding the provisions of paragraphs (5) and (6) of this order and instead setting out the earliest day on which notice of questions for oral answer may be given for each of the first ten sitting days after that adjournment, provided that each such day shall as far as practicable fall on the same day of the week as that on which the question is to be answered and shall not be fewer than fourteen days before the day for answer; and also setting out the latest day for notice of questions for oral answer on each of the first two sitting days following that adjournment provided that each such day shall not be fewer than two days (excluding Saturday and Sunday) before the day for answer.—[Mr. Wood.]

Hon. Members: Object.

PUBLIC ACCOUNTS

Ordered,

That Mr. Peter Lilley be discharged from the Committee of Public Accounts and Mr. Francis Maude be added to the Committee.—[Mr. Wood.]

Haemophiliacs (Aids)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wood.]

10 pm

Mr. John Marshall: I cannot promise to be as brief as my hon. Friend the Member for Stafford (Mr. Cash). I should like to thank Mr. Speaker for exercising his discretion so that that we can have a wide debate rather than a narrow one this evening.
As the House will be aware, we have had a number of Adjournment debates on the vexed subject of compensation for those haemophiliacs who have contracted the AIDS virus. The House may ask why we are having yet another. There are two reasons. First, as my hon. Friend the Member for Staffordshire, South (Mr. Cormack) has said, this problem will not go away. Secondly, developments during the summer recess have underlined the need for yet another debate.
I should like to remind my right hon. and learned Friend the Secretary of State and my hon. Friend the Minister who is to reply to the debate of the words of Boswell in 1773:
A lawyer has no business with the justice or injustice of the cause he undertakes. The justice or injustice of the cause is to be decided by the judge.
Certainly Mr. Justice Ognall has expressed his views clearly as to what should happen in this case. I believe that my right hon. and learned Friend should look once again at the judge's recommendation in that case.
I should like to remind the House of the sequence of events that have led to this problem. In 1974, the Medical Research Council, concerned at the possible spread of hepatitis from infected blood recommended that the United Kingdom should become self-sufficient in blood products. In 1975, the right hon. Member for Plymouth, Devonport (Dr. Owen), as Minister for Health, promised that we would become self-sufficient in two to three years. It is a chilling indictment of what happened in the 1970s that, if that promise had been met, some of the 1,200 individuals who became infected with the HIV virus would not have been infected. Individuals who have died might otherwise have lived.
If we look at the history of the warnings given, we learn that the first death of a haemophiliac infected by AIDS took place in Florida in January 1982. In July 1982, Dr. Bruce Evatt, the director of disease control in Atlanta, published his first warning. In 1983, there was a further warning in The Lancet. In April 1985, national health service heat-treated factor 8 became available, 10 years after the pledge given by the right hon. Member for Devonport.
The result of all that was a human tragedy. Some 1,215 haemophiliacs—one in four—became infected with the HIV virus; 210 have developed full-blown AIDS, of whom 150 have died. One of the greatest tragedies of all is that two dozen wives and girl friends have been infected by individuals who did not know that they had the HIV virus.
Those statistics cannot convey one iota of the depth of the human problems involved. It is a great irony that factor 8, which was designed to improve the quality of life for haemophiliacs, has granted many a suspended sentence of death. Many haemophiliacs have battled to overcome the consequences and difficulties of their illness. Some hon. Members will have seen that, only three weeks ago, Dr.

John Herdman, a relative of one of my constituents, with a PhD in physics, was snatched away at the tender age of 28. No one could fail to be moved by the description in The Sunday Times stating that three years ago he was an active young man who went swimming every day. Now, because of the medical difficulties, he has died, and we have lost a brilliant life.
When I was a university lecturer, one of my most brilliant students was a haemophiliac. Throughout the course, he could not attend one lecture because he lived in Dunoon and could not make the boat and train journey to Glasgow. Despite the fact that he did not attend one lecture and had only two tutorials a term, he came second out of 200. That said a lot for his determination; and it may also have said a little about the quality of the lectures he did not attend and something about the impact of the distractions of the students union on academic performance.
We are faced with the problem of a man seeing his brother die and not being able to say, "There but for the grace of God go I," but knowing that his brother's physical suffering is a dress rehearsal for his own illness and death in perhaps weeks, perhaps months. We face the problem of a widow who is dependent on her sons for financial support, knows that they are both HIV-positive and realises that she will have to attend both their funerals and her financial support will disappear.
It involves the problems of a sister—haemophilia is one of the strange, unique diseases carried by ladies but directly affecting only men—who sees her brother suffer and says, as one has said, that she is witnessing the destruction of all the men of her generation in her family. Haemophiliacs must attend the funerals of victims, not knowing whose funeral will be next. We all attend family funerals, but for some haemophiliacs, doing so has become a way of life, if one can talk about a way of life under such circumstances.
AIDS is a particularly vicious disease, and the physical pain is only part of the problem. The difficulty facing its victims is not merely physical because, in the public mind, AIDS is associated with sexual promiscuity and drug addiction. It is a disease whose mysteries are clouded in prejudice throughout society; that has compounded the problems facing its blameless victims.
Even in Britain, famed as a tolerant and fair-minded society, the very word AIDS is likely to generate prejudice in at least some minds. That has compounded the problems of the father who says that he cannot accept that his son has died of AIDS. It has compounded the problem of the victim who, having told his employer that he has AIDS, loses his job. It has compounded the problem because the friendships enjoyed by the victims have all too often turned out to be skin deep. When people mention that they have AIDS, their friends tend to move away rather than come closer, as they should do.
The victims of the disease do not seek compensation for themselves but for their families. The problem was summed up for me in a few short sentences: "The victim has had to give up work. He knows that he is dying. He only wants peace of mind. He wants to know that his family will be all right." What the victims seek is to die with dignity, secure in the knowledge that their relatives will be cared for and their wives and children will not face a lifetime of penury and penny pinching. Perhaps they want that last family holiday together.
Physical hardship can be alleviated by medicine, but peace of mind cannot be guaranteed by someone's saying, "Let us have a court case to be determined next March, April or June." If we wait for a court case to be determined then, a number of the victims will not be around to see the verdict. Posthumous justice will not grant them peace of mind; it may help their relatives, but it will not help them.
The full majesty of the law is clearly suitable for the vast majority of cases, but I do not believe that it is always a happy vehicle for cases in which speed is of the essence. I do not think that we are in a happy position when litigants are legally aided and the defendant—the Crown—is also relying on the taxpayer to pay the costs. A certain amount of public money will be spent, and it will not bring the law into good repute. I ask my right hon. and learned Friend to examine the matter again.
In 1964, my right hon. and learned Friend and I fought our first general election. The slogan under which we fought was "Prosperity with a Purpose". The reason why Lord Home chose that as a slogan was that he was not following a course of sheer naked materialism, but rather underlining the simple, basic fact that he sought to create greater prosperity—not as an end in itself, but as a means to a far nobler end: the relief of hardship in our society.
There is no conflict between a belief in the social market economy and a social conscience; indeed, only if we have a social market economy can we afford a social conscience. I believe that the challenge to the Secretary of State is a simple one, and I appeal to him as a practical man to come to the House and re-examine the issue.
We are told that it would create a precedent if we paid compensation on a larger scale to the haemophiliacs tomorrow or next week; but are we really being asked to say that, if a further example of this were to hit us, no compensation would be paid? Would we say to another group in our society that they must go to the law? Of course not. I do not believe that the collective conscience of the nation would allow any future Government to walk down the other side of the road like a Pharisee.
Clearly the Secretary of State has been advised that he can satisfy the courts of the land, but I ask him to consider making a short statement to the House. I suggest that the statement should read as follows. He should say that this is an inherited problem, caused by decisions made long before he became Secretary of State or before the Government were returned in 1979; that, as Secretary of State, he cannot be held responsible for decisions made in 1976 and 1977. He should say that the Government provided the resources to permit the heat treatment of blood products so that a similar disaster would never befall the nation. However, I would also like him to say that he will reconsider his decision—reiterated today—about the wisdom of fighting the case through the courts.
I would also like the Secretary of State to show a willingness to enter into discussions with representatives of the Haemophilia Society. The chairman of that society is a constituent of mine who is a respected vicar, and I believe that any agreement that he reached would be honoured by the vast bulk of his members.
Finally, I should like the Secretary of State to say whether he is willing to reconsider whether £20,000 should be the limit for individual compensation. Is that an adequate figure to compensate for the physical difficulties, the emotional traumas, the financial suffering and the loss of life involvd in this case? I fear that if there is no early solution to this problem many people will raise the issue

time and time again. The last time I spoke in an Adjournment debate the only Members present were waiting for a lift to Hampstead; the fact that there are several hon. Members here tonight shows that there is disquiet, and I hope that the Minister—

Mr. Tam Dalyell: Hear, hear.

Sir Geoffrey Johnson Smith: My hon. Friend will be aware that many hon. Members who are not here tonight warmly support what he has said and want further action from the Government.

Mr. Marshall: I thank my hon. Friend for that short, pertinent and welcome observation, and I thank the hon. Member—I shall not be so indiscreet as to mention his name—who said, "Hear, hear," from a sedentary position.
I thank the House for the way in which this debate has been received.

Mr. Hugo Summerson: rose—

Mr. Deputy Speaker (Mr. Harold Walker): Does the hon. Gentleman have the consent of the hon. Member for Hendon, South (Mr. Marshall) and of the Minister?

Hon. Members: Yes, Sir.

Mr. Summerson: I thank my hon. Friend the Member for Hendon, South (Mr. Marshall) and the Minister for giving me one minute in which to speak.
I cannot understand the Government's obduracy over this matter. I can understand the legal frame of mind that shrinks from anything that implies liability, but the lawyers who fear liability should turn their minds to finding a way that would permit payments without imputing liability. If the will exists, the words will be found.
I have at least one HIV-infected haemophiliac in my constituency. His story wrings the heart. He and the others are suffering grievously through no fault of their own. They need a generous and just sum to enable them to live out the rest of their lives in some comfort and dignity. I should like to add my voice to that of my hon. Friend and appeal to Ministers—including my right hon. and learned Friend the Secretary of State—to take whatever action is necessary to ensure that that comes about.

The Parliamentary Under-Secretary of State for Health (Mr. Stephen Dorrell): My hon. Friend the Member for Hendon, South (Mr. Marshall) has used the opportunity of this first Adjournment debate of the autumn term to draw attention to an issue of undoubted public concern. I shall begin by trying to sketch out what I see as the common ground between him, the Haemophilia Society and Ministers. I am struck by the extent of the common ground between us on this subject.
First, it is clearly common ground that this story represents a terrible human tragedy, made more poignant by the fact that its cause was that people came to the NHS to receive treatment intended to enhance their lives and it ended up shortening them. There is sometimes a tendency for Ministers to reply to debates of this sort by citing statistics and legalistic arguments, and I shall have


something to say about the Government's legal position in a few moments, but I begin by reminding the House of the facts.
We are talking about 1,200 men and women who sought care from the NHS and received a lethal dose. We are talking about people who relied on the expertise of health professionals and—although they could not have known this at the time—found it wanting. We are talking about 1,200 families of people who were already sick and who looked to the NHS for hope and found it cruelly snuffed out.
Of course my right hon. and learned Friend the Secretary of State and I feel a profound sympathy for the people caught up in this tragedy. He and I want to help, and of course we both feel these basic human emotions. However, those emotions do not add up to a policy.
As I have discovered in the last six months, it is part of the lot of a Health Minister to witness a wide variety of human devastation. If my hon. Friend the Member for Hendon, South doubts that, I invite him to come with me on some of my visits to national health service installations, where I see people whose lives have been permanently scarred by spinal injuries or mental handicap that may have been caused at the moment of birth. A visit to the patients in any children's hospital is also enlightening. One learns quickly that a Health Minister cannot right all wrongs, because that object is not achievable. All that we can do is to offer the best health care within the resources that are available.
My hon. Friend asked us to look again at the judge's statement on which he placed some weight. Much of what Mr. Justice Ognall said in that statement gives rise to no disagreement from the Government. He said:
The plight of the plaintiffs—or many of them—is a special one:
(a) All of them suffer from or live in the shadow of a fatal condition for which there is presently no known cure. That is obviously true. The judge said:
Many have already died, and in the nature of things many more will die without knowing the outcome of this litigation. It seems to me, at least, that this factor should be treated as cardinally important.
As I shall show, the Government have already acted on that understanding. The judge said:
It is common ground that all plaintiffs are entirely blameless … I believe that the legal profession has a duty to do its best to see that the legal system does not become a scapegoat in the eyes of the public for what I fear may be perceived as the unjust and inhumane denial of any significant measure of compensation to the plaintiffs. 'The law must take its course' is not an attractive principle in the context of this case.
I agree with all those quotations. The judge's argument is based on the proposition that the Government have a moral obligation to the victims in this case. The Government accept that moral obligation and that is why funds have been made available, first in 1987 and again last year, to the Macfarlane Trust. Those funds were made available well ahead of this litigation and made possible a minimum payment of £20,000 to each person affected and assistance to families in need. We gave an undertaking, repeated many times, that the Government will review that assistance to ensure that it is adequate to meet the case. The total already amounts to £34 million.

Mr. John Marshall: Will my hon. Friend give way?

Mr. Dorrell: Only once.

Mr. Marshall: I know that my hon. Friend will give way only once. Will he underline his statement that the Government are willing to reconsider the amount of assistance? That is very important.

Mr. Dorrell: As I have already said, the Government have repeatedly said that they will keep under constant review the payments made to the Macfarlane Trust and the fund attached to it to ensure that they match the case. Our track record demonstrates that in practice we have done that.
The judge argued that there is a moral obligation and, outside the context of their case, the plaintiffs also argue that case. The Government accept that obligation and acted on it well in advance of the litigation, and that reflects the sense of urgency that has been argued in support of the case. Once again, that argument gives rise to no disagreement. The disagreement between the parties is not over the principle of moral obligation, because all are agreed on that. Apart from the court case, the disagreement is over the level of compensation that will discharge the moral obligation.
We must acknowledge that here we are in difficult country and that legal practice simply does not help. The courts can help us with the amount of compensation that is payable in cases where a person is proved to have been negligent. In this case, the Government and all the defendants in the action deny negligence and we are left with the question about the level of compensation that will discharge the moral obligation.
That raises the more fundamental question—and one that is not capable of being settled by a law court: What is the value of life? The court asks not that question, but what is the amount of compensation necessary to put a plaintiff in the position in which he would have been before the damage caused by negligence. That is not the question in this case and it is not relevant when considering a moral obligation. The only disagreement is the level of payments necessary to discharge that moral obligation—a matter that, in the nature of things, can be only a matter of judgment.
My hon. Friend the Member for Hendon, South referred to the thalidomide case. That was a different case, because the payments were made in settlement of a negligence action. They were explicitly and closely linked to the scale of damages payable where negligence is proved. That would not be right in this case, because it is the defendant's view that there was no negligence. Against that background, it would be wrong to link payments made in discharge of a moral obligation to payments that would have been made in the event of a successful negligence action.
It is also argued that there should be no-fault compensation. People say, "Why inquire about fault? There is an injured party, so why not just pay damages?" That raises two points. First, even those who support the principle of no-fault compensation do not support the suggestion that, in the event of compensation being paid in cases where no fault is proved, that compensation should reflect the damages that would have been paid if negligence were proved. No one has argued that that would be the proper quantum for damages. Secondly, the whole issue of no-fault compensation was extensively examined by a


royal commission—the Pearson committee in 1978—and rejected. Its advice has been accepted by Governments of both parties.
I strongly believe that this is a sad case. The moral obligation exists and has been acknowledged by the Government. The argument is not one of principle against a moral obligation. However, there remains another disagreement, and it is the subject of the action before Mr. Justice Ognall. Some 1,000 victims and their families are suing the Government and other defendants for negligence. They are perfectly entitled to do so, and I make no complaint about it.
It would be unwise to comment on the detail of the action. However, I wish to comment in general terms about why I am in no doubt that the action should be resisted. As I have already stressed, it is based not on a moral responsibility—that is not in dispute—but on alleged negligence by the Department of Health, the national health service and others. That is a quite different proposition. Each case is individual and the Government cannot simply admit negligence where they believe that none exists.
I have studied the background. I am not a lawyer, but as a layman I do not believe that, in common sense, the negligence claim stands up, not least because it has not been shown what more attractive alternative action was available at the time. What more attractive alternative decision would have been sensible on the basis of the evidence then available? When reviewing the papers, time

and again I asked myself whether, on the information available at the time, I would have acted differently. Time and again, I could only answer, "No." Ultimately, it is for the court to decide whether there has been a case of negligence. If the individual plaintiffs believe that negligence exists, it is not for a politician to interfere. However, I have seen no evidence of that and therefore I believe that it is right to resist the claim of negligence, while acknowledging the moral obligation—as we do.
I see a sad story of people trying to help and, unwittingly, making matters worse. I see clearly a case in which the Government have tried to discharge—and, indeed, have discharged—a moral obligation to act. I cannot accept that that moral obligation is affected by an independent belief by some victims that they have a claim in negligence.

Mr. Tam Dalyell: It is 12 long years since the Pearson commission reached its conclusions and thinking has moved on since then. A great many hon. Members, some of whom could not be here tonight, support the hon. Member for Hendon, South (Mr. Marshall)—

The motion having been made after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.